Thursday, April 15

No liquidity crisis, says government official

NEW DELHI: There is surplus liquidity in the system and no cause for concern over that, an official said on Friday after the government held a meeting with bankers to take stock of the situation, especially for non-banking finance companies (NBFCs).

“Banks said they are buying portfolios of NBFCs and there is no shortage of liquidity,” the government official said, adding that most NBFCs have also said they have surplus reserves.

Defaults by infrastructure development and finance company IL&FS and its subsidiaries had led to concerns of grave repercussions on the credit market, leading to a liquidity crisis. “Already enough actions have been taken and there is no undue panic,” said another official who attended the meeting.

Last week, the Reserve Bank of India (RBI) had allowed banks to allocate up to 15% of total lending to NBFCs that do not finance infrastructure projects. The earlier limit was 10%. Lenders were also permitted to use government securities equal to the incremental credit disbursed by them to NBFCs.

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