NBFCs Liquidity Crunch

IT firms viz Infosys and TCS have slashed their exposure to liquid mutual funds in September Quarter in the fear of liquidity crunch in the Non-Banking Finance Companies where liquid mutual funds have more investments.

  1. TCS has cut its Mutual Fund units exposure by 20% which amounts to Rs. 4,926 crore at the end of September 2018. This figure was Rs. 6,370 at the end of the quarter June 2018
  2. Infosys held investments in liquid mutual funds Units at Rs. 870 crore at the end of September 2018 quarter, which was 43% lower than the previous quarter. The figure as at the end quarter June 2018 was Rs. 1535 crore.
  3. Infosys has preferred to park the liquid funds in Banks rather than in liquid MFs
  4. The Infosys Deposit Accounts with Banks showed a figure of Rs. 9,972 crores at the end of September 2018 which was Rs. 7,036 crore in June 2018. This accounted for about 40% increase in the Deposit figures across different banks.
  5. Current Account of TCS showed a figure of Rs. 5,322 crore at the end of September 2018 which was Rs. 3,911 crore at the end of June 2018.
  6. Infosys further adds that Credit risk on cash and cash equivalents is limited as it generally invests in deposits with banks and financial institutions with high credit rating assigned by international and domestic credit rating magnetics.
  7. Investments include Liquid Mutual fund units, and Fixed Maturity plan securities.

Note:

  • The exit from liquid and ultra-soft funds reveal that Corporate/Institutional investors have been alarmed by a potential liquidity tightening situation by NBFCs
  • NBFC commercial papers less than 180 days accounted for a fifth of mutual fund holdings.
  • However, FD rates do not match the returns of debt Mutual funds possibly to observe safety.

 

 

Author: Admin Bankedge

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