Non-banking finance companies (NBFCs) have sought setting up of a permanent refinance window for the sector in the Union Budget, which they say will help them diversify their funding sources.
The shadow banking players have also asked for allowing the NBFCs with strong support from their parents to access public deposits.
Finance Minister Nirmala Sitharaman is scheduled to present the Budget for financial year 2020-21 on February 1.
Banks have been reluctant to lend to the NBFC sector after a series of default by Infrastructure Leasing and Financial Services (IL&FS) in September 2018.
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This risk averse approach of banks created a liquidity crunch for the entire NBFC sector which in turn had a multiplier effect on the important sector like automobiles, micro, small and medium enterprises (MSMEs) and consumer goods.
“The need of the hour is to develop funding sources for NBFCs outside the banking system. A dedicated refinance window for NBFCs, has been a long-standing demand of the NBFC sector,” Finance Industry Development Council (FIDC) chairman Ramesh Iyer said in a pre-budget memorandum submitted to Sitharaman.
Source: Economic Times
