It is important to wait for the entire package to come to see if
the measures will improve demand in the economy in any manner.
The relief package
announced by Finance Minister Nirmala Sitharaman on Wednesday, including the Rs
30,000-crore special liquidity scheme for non-bank finance companies (NBFCs),
housing finance companies (HFCs), and micro-finance institutions (MFIs), is definitely
a positive development for non-bank finance companies (NBFCs) given the tight
liquidity conditions in the Covid-19-hit
economy.
Compared to what
we have seen so far, we can say that this package has some ‘relief’ for the
sector. That said, we need to wait for all the announcements to come through
before judging how each and every announcement will play out.
The FM announced a
set of stimulus measures totaling nearly Rs 5.94 trillion to provide relief to
micro, small, and medium enterprises (MSMEs); taxpayers; NBFCs;
power distribution companies; the real estate sector; organised sector
employees; and contractors working with the government.
While these
announcements are enough are keep NBFCs, and micro finance institutions (MFIs)
afloat in the current environment where working capital is drying up, it won’t
revive the sector per se. Those NBFCs, who were unable to make repayments
currently or need immediate cash to survive, would benefit from the
announcements but we need to see contours of all the announcements before
taking the final call.
Consider this: The
NBFCs have given loan to a supplier who sees no demand for his/her product. How
will the announcements made Wednesday help solve this situation? We don’t know
yet! Therefore, it is important to wait for the entire package to come to see
if the measures will improve demand in the economy in any manner.
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