IL&FS crisis: SBI to buy NBFCs’ assets worth Rs. 45,000 crore

Coming to the rescue , State Bank of India has decided to buy assets of cash-strapped non-banking financial companies (NBFCs) to the tune of Rs. 45,000 crore.
The move will provide liquidity support to the firms in the sector that are facing headwinds after a series of loan defaults by Infrastructure Leasing & Financial Services (IL&FS) group firms, media reports said.
The decision of SBI, Economic Affairs Secretary Subhash Chandra Garg said in a tweet, should alleviate liquidity concerns of non-banking financing companies (NBFCs) to a great extent, reported PTI.
NBFCs along with mutual funds have been facing a liquidity crunch following a series of loan repayment default since late September by IL&FS and its group companies, the report said.
“Bank had initially planned for a growth of Rs. 15,000 crore through portfolio purchase during the current year which is now being enhanced. As per the bank’s internal assessment, there may be an opportunity to buy additional portfolio in the range of Rs. 20,000 (crore) to Rs. 30,000 crore,” SBI was quoted as saying.
SBI Managing Director PK Gupta reportedly said, “It is a good commercial opportunity for the bank to increase the loan portfolio as NBFC assets are available at attractive rates.”
It will benefit both State Bank of India and the NBFC sector as they get the much-required liquidity while the bank will get a good loan portfolio, Mr Gupta explained.
“SBI today stepped up substantially a facility for purchasing portfolio of assets from NBFCs to provide liquidity to NBFCs. SBI would buy such portfolios up to a total amount of Rs. 45,000 crore. This measure should alleviate liquidity concerns to a great extent,” Mr Garg tweeted.
Earlier on September 23, SBI Chairman Rajnish Kumar had allayed concerns over the liquidity position of NBFCs and assured financial institutions that lending would not be curtailed to the sector, the PTI report highlighted.
SBI reportedly said it has stepped up target purchase of “good quality portfolio of assets from NBFCs as it believes that there is good opportunity to expand its loan portfolio at attractive rates”.
The bank is looking for opportunities both in priority and non-priority sectors, it said.
Capital markets regulator Sebi, the Reserve Bank of India, the corporate affairs ministry and the finance ministry have received complaints about alleged wrongdoings at IL&FS and its various group entities, including the listed ones followed by several resignations at the group including its CEO and MD Ramesh Bawa, the report said.
The board of the IL&FS was also dissolved and the government took control of the company by constituting a new six-member board under Uday Kotak, managing director and CEO of Kotak Mahindra Bank, it added.

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