Twitter
Advertisement

Govt to take all measures to ensure liquidity in NBFCs: Arun Jaitley

There are liquidity concerns following default in repayment of loans by diversified IL&FS group. Another housing finance company, DHFL, too is reportedly facing liquidity crisis.

Latest News
article-main
FacebookTwitterWhatsappLinkedin

Seeking to calm the nerves of worried investors, Finance Minister Arun Jaitley said on Monday that the government would take all measures to ensure adequate liquidity for non-banking financial companies (NBFCs) and mutual funds. The minister's remarks come in the wake of stock markets witnessing sudden and stiff fall in intra-day trade on Friday over concerns of liquidity crisis being faced by some of the NBFCs.

"The Government will take all measures to ensure that adequate liquidity is maintained/provided to the NBFCs, the mutual funds and the SMEs," Jaitley tweeted ahead of the opening of stock markets.

The Reserve Bank of India (RBI) and market regulator Sebi said on Sunday that they were closely monitoring the developments in the financial sector and were ready to take "appropriate actions" to calm the jittery investors.

There are liquidity concerns following default in repayment of loans by diversified IL&FS group. Another housing finance company, DHFL, too is reportedly facing liquidity crisis.

Meanwhile, the five-pronged strategy announced by the government to increase capital inflow into the country is unlikely to reverse the rupee depreciation, Moody's Investors Service said on Monday.

The Indian government estimates that the measures, including exempting investors from withholding tax for offshore rupee-denominated (masala) bonds and allowing Indian banks to become market-makers, will increase capital inflows by USD 8-10 billion, or 0.3-0.4 per cent of GDP, in the fiscal year that ends March 31, 2019.

The government also announced its intention to curb imports and reiterated its commitment to this year's fiscal deficit target.

Although these measures provide credit positive support to India's external account, they are unlikely to reverse the currency's depreciation, Moody's said.

The rupee has depreciated more than 10 per cent against the US dollar since January 2018 and was at Rs 72.1 against the dollar as of September 21.
Moody's, however, said that strong macroeconomic fundamentals will keep the credit risks of a weaker currency at bay.

The measures will likely take time to affect capital inflows. Moreover, although the potential removal of hedging requirements could reduce some short-term pressure on the rupee, it could also heighten corporates' exposure to currency fluctuations, Moody's said.

Find your daily dose of news & explainers in your WhatsApp. Stay updated, Stay informed-  Follow DNA on WhatsApp.
Advertisement

Live tv

Advertisement
Advertisement