RBI risk draft may hit NBFCs; FIDC asks to address liquidity problem first

Borrowing cost could increase lower investment spread

The Reserve Bank of India�s (RBI�s) draft guidelines on liquidity risk management for non-banking financial companies (NBFCs), announced on Friday last week, could dilute the latter�s profitability in the near term, albeit marginally.

Though in draft form, the guidelines were anticipated by market/industry experts and are in the right direction because the sector has been reeling from liquidity problems after the IL&FS crisis in September last year.

An initial reading of the guidelines indicates two factors � potential rise in borrowing cost and lower returns on investment book � could hit the spread of NBFCs. 

The