NBFCs feel the pinch as MFs curtail debt exposure

The investments made by Mutual Funds in commercial papers and bonds that mature in 90 days plummeted to Rs. 3.24 trillion towards the end of March reporting the lowest figures in the last six quarters.

This is largely on account of the NBFC crisis that rocked the markets towards the end of last year. Most NBFCs are grappling with the repercussions as they’re struggling to generate funding.

As such, most NBFCs have had to resort to selling stakes or raising funds either by disposals or through securitizing more loans. The downgrade in ratings on debt instruments further added to their misery. The RBI had to intervene in order to induce liquidity to the careworn credit markets.

The withdrawal of MFs is attributable to the general reduction in credit flows to select lenders as well as rising concern pertaining to credit rating downgrades.

While the central bank’s intervention aided in restoring some normalcy in the credit markets; the low-rated NBFCs lenders are still struggling to attract investors.