The money guzzlers
Mutual funds: Heavy redemption pressure may force many mutual funds to knock on the doors of banks
Real estate firms: Subdued festive season demand and job cuts in the economy may reduce the cash flow of developers
NBFCs: Banks and mutual funds have turned their back on them and they are severely in need of funds
Housing finance companies: All the outside sources of raising money have dried down. They need money for the core business of housing finance
SMEs: Severely impacted by demand destruction in both overseas and domestic markets. Need money to fund expansion and working capital
Retail lending: Bankers are exiting from small ticket size personal and twowheeler loan and other unsecured loans
The liquidity situation of small and medium enterprises (SMEs) also worsened because of the global slump in demand. “They, too, had to be bailed out by banks,” says a banker.
“Many traditional sources like IPO and ECB dried up—resulting in greater reliance on the banking sector,” says Shubhada Rao, Chief Economist, YES Bank. The situation, however, is improving. “Bankers are slowly regaining the confidence to lend as the liquidity situation improves. There is surplus liquidity in the system to the extent of Rs 40,000-50,000 crore,” says Barua. Bankers however, are still cautious in lending indiscriminately to individuals or to companies,” says Rajesh Mokashi, Executive Director, Care Ratings.
If everything goes well, this additional money may lift the sagging morale of the Indian economy. But if the global situation deteriorates further and foreign investors flee in numbers, the liquidity will once again vanish into thin air. And the same questions may come to haunt us all over again.
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