Media reports suggest that a leading Mumbai based Non-Banking Finance Company (NBFC) is scrambling for over Rs 1,000 crore which it needs to meet obligations. In fact, there are several NBFCs which are deep neck in trouble. The problem has been exasperated after the IL&FS disaster which is coming out to be a scam with several investigations into evaporating of over Rs 1 lakh crore without any accountability under the nose of the profile industry icons and government officials.
Does it mean the NBFC business model has collapsed? It seems so, for several of them which existed and even flourished merely by swapping one client’s cap with the other. Even those so-called business men and women who survived and even flourished by borrowing banks’ money and got away without returning. Long hauls in courts came to their rescue; A tough stand by the Modi Government helped by the Insolvency and Bankruptcy Code, which further needs amendments, have meant end of their frauds.
The problems in NBFCs could be attributed to both unscrupulous practices and irrational exuberance, lured by attractive returns in high risk sectors like the stock market, real estate etc. Same is true about the high leveraged corporate firms which went on pumping money into their unviable businesses as if there is no tomorrow. The RBI, commercial banks too had a blame to share, at least for sleeping over these developments.
The failed NBFCs are becoming a big headache for the new Finance Minister Mrs Nirmala Sitharaman, as the impact of these failures would be cascading.
MUMBAI: Dewan Housing FinanceNSE -1.28 % Ltd (DHFL) has missed Tuesday’s interest payment deadline on a set of outstanding bonds, but the embattled company is in talks with financiers to help meet its Rs 1,000-crore-plus obligation within the seven-day grace period and prevent a default.