InvestorQ : Is it true that banks are freezing credit lines to the NBFCs due to their fragile situation and what happens to stocks like Bajaj Finance, HDFC and others?
Anamika Sodhani made post

Is it true that banks are freezing credit lines to the NBFCs due to their fragile situation and what happens to stocks like Bajaj Finance, HDFC and others?

Answer
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5 months ago


It is true that a number of PSU and private Indian banks are freezing credit lines to NBFCs. While this may give some relief to bank NPAs, it risks wider financial contagion. PSU banks and private banks have virtually stopped lending to NBFCs due to financial health concerns causing a severe working capital squeeze for NBFCs. The irony is that NBFCs account for 20% of overall lending and the NBFC debt collections have virtually dried up amid a 40-day nationwide lockdown. The problem may be less for companies like HDFC and Bajaj Finance which have access to other funding sources. Smaller NBFCs with exposure to real estate may be the worst hit of the lot. However, the moratorium has hit collections badly across the board.