A bane for mutual funds has become a boon for non-banking finance companies (NBFCs). The recent redemptions of Rs 2 lakh crore in mutual fund schemes have made their way to banks. This will help NBFCs as the banks could use these funds to buy good quality assets from the NBFCs.
The IL&FS crisis has resulted in NBFCs feeling a liquidity crunch. One of the factors that added to their woes was redemptions in mutual funds because mutuals in turn were cautious about taking fresh exposure to debt instruments floated by shadow banks.
However, according to a report by HDFC Bank, following the IL&FS crisis, there has been a reversal with investors pulling out of liquid and fixed income funds that support NBFC funding. Estimates say Rs 2 trillion moved from MFs back to banks.
“This we believe is a more probable scenario and could help ease a lot of liquidity related worries going forward,’’ the report said.
Banks have indicated they could acquire assets of both priority and non-priority sectors from NBFCs.