NBFCs pulling back on loans to MSMEs: Moody's
The liquidity crisis triggered after the default of IL&FS is causing the non-banking financial and housing finance companies to pull back on loans to micro, small and medium sized enterprises (MSMEs), Moody's said on Wednesday.
 
"The value of loan against property (LAP), assets under management by HFCs and NBFCs increased by 8.3 per cent over the six months leading to December 2018, down from 15.4 per cent growth over the previous six months," Moody's said.
 
Moreover, according to Moody's, it does not expect LAP lending by NBFCs and HFCs to pick-up significantly in the next few months too as the operating environment remains challenging for them as they continue to face issues with accessing funds.
 
"Indian non-banking financial companies (NBFCs) and housing finance companies (HFCs) are pulling back on loan against property (LAP), lending to micro, small and medium sized enterprises (MSMEs) because of the funding squeeze caused by the liquidity crisis in the country's financial sector," Moody's said in a note.
 
This situation is credit negative for asset-backed securities (ABS) backed by LAP to MSMEs, because it will reduce refinancing options for these small businesses, potentially leading to loan delinquencies and defaults, the brokerage firm added.
 
Besides, it said that the declining real estate prices in some cities and a slower pace of price growth in others has curtailed refinancing of LAP and hurt recovery prospects for defaulted loans.
 
Disclaimer: Information, facts or opinions expressed in this news article are presented as sourced from IANS and do not reflect views of Moneylife and hence Moneylife is not responsible or liable for the same. As a source and news provider, IANS is responsible for accuracy, completeness, suitability and validity of any information in this article.
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    Muniyandi

    2 weeks ago

    50000

    New NPCI guidelines bring bad news for UPI-only e-wallets PhonePe, Google Pay
    PhonePe's and Google Pay's success ride on the back of UPI will soon hit a road block as the National Payments Corporation of India (NPCI) is all set to introduce new guidelines for digital payment companies to minimise concentration and systemic risks in UPI.
     
    One of the important provisions initiated by NPCI is to put a cap on the UPI market share of digital payment companies. This move directly impacts UPI-only players such as Walmart's Phonepe, Google Pay and to be launched Whatsapp Pay. Interestingly, Paytm is the only major player which is still backing its wallet success and cards besides UPI.
     
    Starting April 2020, PhonePe and Google Pay will have to limit their marketshare to 33 per cent which eventually blocks their growth plans. Till now, they have been burning a lot of cash to gain the highest market share and this move comes as a major setback.
     
    Interestingly, Morgan Stanley had recently referred Phonepe emerging as a major factor for a handsome upstick in Walmart share-prices. However, this new capping may affect the company's valuation jump and fundraising plans as it seeks $1 billion from Tiger Global, Tencent, DST Global, Softbank and others.
     
    A senior banker said on anonymity, "This exhibits NPCI's raising concerns over the increasing security threats by non-banking payment companies. Phonepe will have to re-visit its business strategy for a possible fundraise at this stage."
     
    Other industry veterans and experts have applauded NPCI's move and are of the opinion that this will secure the digital payments infrastructure in India.
     
    Disclaimer: Information, facts or opinions expressed in this news article are presented as sourced from IANS and do not reflect views of Moneylife and hence Moneylife is not responsible or liable for the same. As a source and news provider, IANS is responsible for accuracy, completeness, suitability and validity of any information in this article.
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    Arumugaraja A

    1 week ago

    How can you control market share in percentage? Doesn\'t it keep changing?
    You can limit transaction count or amount through that app.

    Ramesh Poapt

    2 weeks ago

    right step!!

    Chandragupta Acharya

    2 weeks ago

    What is their current market share?

    SBI Cuts Interest Rates on Loans by 10 bps and Term Deposits by 25 bps
    Country's largest lender State Bank of India (SBI) on Monday announced a reduction in its marginal cost-based lending rate (MCLR) by 10 basis points (bps) across all tenors. At the same time, SBI also lowered interest rates on fixed term deposits across all maturities by up to 25 basis points.
     
    The one year MCLR based lending rate will come down to 8.15% after the rate cut.
     
    The move is the fifth consecutive reduction in MCLR by the lender so far this financial year.
     
    In view of the falling interest rate scenario and surplus liquidity, SBI says it also realigned its interest rate on term deposits (TD) from 10 September 2019. SBI has slashed retail TD rates by 20-25 bps and bulk TD rates by 10-20 bps across tenors.
     
    The cut in interest rates comes on the back of the Reserve Bank of India (RBI)'s 1.1 percentage point reduction in the repo rate - the key interest rate at which it lends short-term funds to commercial banks - so far this year.
     
    The new rates are effective from 10 September 2019.
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