India’s largest lender State Bank of India has come out with the proposal to buy quality assets worth Rs. 45,000 crore from NBFCs who are facing liquidity crunch.
- In the fear of managing their Assets and Liabilities, many banks are fearing to extend lending at present. At this stage, SBI the largest Indian Bank, has come out with the proposal of buying Assets worth Rs. 45,000 crore from NBFGCs.
- This comes in view of the NBFCs writing to the Government about their liquidity crunch and the rescue measures to overcome the same.
- Through portfolio purchase the bank had earlier planned for a growth of Rs. 15,000 crore
- The bank’s books however reveal that there may be an opportunity to go for an additional portfolio of Rs. 20,000 to Rs. 30,000 crore
- Many of the NBFCs have the fear of liquidity crunch after the recent IL&FS crisis.
- This coupled with RBI’s fear of a liquidity crunch at NBFCs which may lead to mismatch in the Asset Liability management.
- For funding of long term assets, RBI had advised all financial institutions to go for equity and other modes of long term finance.
- RBI also has said that chasing lower marginal cost of funding to retain market share in lending is accompanied by a significant rollover risk in the medium term which is unhealthy.
- It is looked as a commercial opportunity to increase the bank’s loan portfolio
- NBFC assets are available at a lucrative price
- This would increase the priority and non-priority sector figures of the bank