The default by IL&FS last September dried up liquidity for the shadow banking sector, forcing NBFCs to look for alternative sources of funding. As mutual funds are pulling back, NBFCs are now opting for securitisation (conversion of loans into debt instruments), external commercial borrowings and public bond issuances to raise money. While securitisation reached a 10-year-high of Rs 1.9 lakh crore in 2018/19, public bond issuances last fiscal (till January) were up over six times year-on-year to Rs 33,700 crore. But these measures are not enough to support the disbursement growth. ICRA has noted that NBFCs' assets under management growth slowed to 3.3 per cent quarter-on-quarter in Q3 2018/19, the slowest in the last 10 quarters. It had grown 21.5 per cent in the December 2018 quarter.
With continuing likelihood of defaults by some players, adequate liquidity for NBFCs will remain a mirage, at least for the next few quarters.
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