NBFC Crisis: Demand and stability may end the pain

The historical stock market ride ended in September and the NBFC Crisis was the main reason for it. The crisis did not just affect the sector but also hit market sentiments on a broader level.

One of the fund houses offloaded its exposure in DHFL, which initiated a downfall in markets and raised concerns about liquidity issue on account of defaults from IL&FS to its lenders. The crisis hit the overall market trend which was evident from the subdued festive season too and the auto sales number also slowed down as an effect of less credit availability with other NBFCs.

The credit provided by NBFCs is important as they are the primary source of funds for a short duration. As soon as the negative headwinds are over, the demand for credit facilities is expected to rise. Further, the higher cost of funds also adds to the worries of these companies. The banks who are the main source of funds to NBFCs also should focus on decreasing these costs. This will not just help finance companies but will give the much-needed boost to demand. For NBFCs to grow, the sectors such as auto, infra, construction etc need to do better than what they did in the recent past.

After a series of negative news for the sector and lack of demand, the NBFC sector will take cues from the Union Budget and increased spending by government. The changed tax slabs, farm income support, financial support for daily wages workers etc may lead to higher consumption. Thus lead to a rise in demand to end the pain of the NBFC sector.