The State Bank of India (SBI) will triple its purchase of loan portfolios from non-banking finance companies (NBFCs), offering relief to the beleaguered shadow-banking sector that is facing liquidity pressure following the recent defaults by IL&FS and its subsidiaries.
Earlier, when there was an ample liquidity in the system, many of these NBFCs heavily depended on short-term borrowings that came at attractive rates to service their long-term financing. This, however, exposed them to an asset-liability mismatch and led to roll-over and re-pricing risks.
In a statement on Tuesday, the SBI said it had stepped up the target to purchase good quality portfolio of assets from NBFCs. The country’s largest bank added that there is a good opportunity to expand its loan portfolio at attractive rates.
“The bank is looking for opportunities both in priority and non-priority sectors. The bank had initially planned for a growth of Rs 15,000 crore through portfolio purchase during the current year which is now being enhanced. According to the bank’s internal assessment, there may be an opportunity to buy an additional portfolio in the range of Rs 20,000 to Rs 30,000 crore,” it said.
In order to meet their lending targets, sources said, banks usually purchase part of the priority sector portfolio of NBFCs.
However, the SBI is now looking at purchasing non-priority sector loans as well.
Such purchases will help NBFCs as it will give them the much-needed liquidity and reduce their dependence on the market, particularly for short-term debt instruments.
SBI chairman Rajnish Kumar told a business news channel on Tuesday that the lender would do proper due diligence before acquiring these loans and that it had not withdrawn any sanctioned limits to NBFCs.
“This is a good commercial opportunity for the bank to increase the loan portfolio as NBFC assets are available at attractive rates,” SBI managing director P.K. Gupta told PTI.
The SBI’s move comes a day after the National Housing Bank (NHB), which regulates housing finance companies, raised the refinancing limit to Rs 30,000 crore from Rs 24,000 crore.
The step is expected to improve the availability of funds for these firms.
However, in a recent note, analysts at Kotak Institutional Equities said AAA-rated NBFCs with strong parentage continue to borrow from banks at their marginal costs of funds based lending rate (MCLR) or at a marginal (25 basis points) premium to the MCLR which is below 9 per cent.
Earlier, these players had raised funds from debt markets and they are now shifting to banks.
In the later half of September, it came to light that the IL&FS group had defaulted on a short-term loan of Rs 1,000 crore from Sidbi, while a subsidiary had also defaulted on Rs 500 crore dues to the development finance institution.
