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NBFC stress poses contagion risks to growth, says Economic Survey

It warned that if the impact of the stress in the NBFC sector spilled over this year, it might lead to lower credit offtake from NBFCs

IL&FS
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Jash Kriplani Mumbai
The Economic Survey for 2018-19 highlighted contagion risks posed by stress in non-banking financial companies (NBFCs). It has hurt consumption growth in the automobile sector affecting manufacturing, the Survey said.

It warned that if the impact of the stress in the NBFC sector spilled over this year, it might lead to lower credit offtake from NBFCs, which might impede consumption spending growth. The Survey charted the origin of the NBFC crisis to mutual funds' (MFs') risk aversion after the IL&FS crisis in September. 

"Immediately after the IL&FS crisis, NBFCs faced a severe liquidity crunch as MFs stopped refinancing the loans of NBFCs,"

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