As competition in NBFC space rises, asset quality bound to take a hit

With PSU Banks reeling under crisis, the NBFCs had a field day in the last 3-4 years

Last week we witnessed the contagion effect of the tightness in money market amid continuing financial crisis at IL&FS. This led to stock prices of most Housing Finance and NBFCs witnessing heavy selling losing 10-60 per cent range of Rs 2-3 bn) in the secondary market at a higher yield due to tight liquidity in the system. Other housing finance companies and NBFCs too witnessed sell-off, as borrowing cost for NBFCs is expected to rise and they could face challenges in raising funds. Commercial papers is a major source of funding for NBFCs and HFCs. According to Moodys’, NBFCs rely