There are no takers for short-term loans against securities through the special liquidity window for non-banking finance companies (NBFCs) though the interest rate on such loans has been lowered by 200 basis points to 12.5 per cent.
Sources close to the development said that IDBI Bank’s Stressed Asset Stabilisation Fund (SASF), which was the designated special purpose vehicle for sanctioning loans against commercial paper and non-convertible debentures (NCDs) held by NBFCs, has so far sanctioned only Rs 750 crore, against the facility of at least Rs 20,000 crore approved by the government and the Reserve Bank of India.
Only Cholamandalam DBS Finance has availed the facility to correct short-term asset-liability mismatch, though there have been queries from a host of other companies. More than 100 non-deposit taking systemically important NBFCs were eligible to access the facility to correct their asset liability mismatch arising out of the global financial crisis.
The sources said that the interest rate was cut at the government’s behest as NBFCs had cited high cost of loans as one of the reasons for not using the special window.
The official position, however, was that the rate came down as the repo rate was cut and the lending rate was linked to the cost of funds. But sources pointed out that the repo rate was only reduced by 50 basis points to 5 per cent. According to the cost structure, RBI has been allowed to charge 400 basis points above the prevailing repo rate. Another 1.5 per cent was to be added due to the government guarantee fee and SASF was permitted to charge up to 350 basis points to cover its administrative and management cost.
Apart from the high-cost of funds, NBFCs have also cited the end-use restrictions as one of the deterrents for the low offtake since the funds cannot be used to expand business.
Further, they said that the facility was available only for three months and companies may not find it easy to raise resources to repay.
“The market conditions are yet to improve and it may not be easy to get lower-cost funds from banks and other sources to repay the funds raised through the special window,” said a source from an NBFC.
