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State-run banks may trim NBFC exposure
Pratibha Rathore
MUMBAI, January 13: A majority of the public sector banks have decided to cut down their exposure in non-banking finance companies (NBFCs). The move is likely to hit the NBFC sector badly as most of the non-banking finance companies are already under pressure to return public deposits following the new Reserve Bank of India regulation announced in the first week of January.Some of the leading NBFCs, in fact, have approached the Reserve Bank to increase the extent of bank credit to the sector. The list of banks seriously contemplating to reduce their exposure in the NBFC sector includes the State Bank of India, Bank of India, Bank of Baroda, State Bank of Travancore (SBT) and other SBI associates.SBT has already formulated a strategy to reduce its exposure in the NBFC sector. Talking to The Financial Express, a SBT source said: "We have a huge exposure in the NBFC sector. In some cases we have even gone beyond the permissible level. Now we want to reduce our credit exposure in this sector." SBT has lent
about Rs 325 crore to 20 NBFCs. "In the NBFC sector the risk is very high. We have already reduced our long-term exposure in some of the companies," said the source.The State Bank of India is also reviewing its exposure in the NBFC sector. "We are looking at our credit exposure towards the non-banking finance companies. However, we have not yet decided on our plan of action," said a top SBI official. Meanwhile, other SBI associate banks are also believed to have reviewed their exposure to the NBFC sector and are busy framing strategies on how to pare the limits. Bank of Baroda, one of the leading public sector banks which has an exposure to the tune of over Rs 600 crore in the NBFC sector, has directed its clients to furnish detailed financial status of the company including all financial parameters like capital adequacy ratio, net income, strategies framed by them to survive in the existing uncertain environment and other related details. The bank has exposure in companies like Gujarat Lease Finance,
Sundaram Finance, Cholamandalam Finance and others. The bank has taken a policy decision not to increase its exposure in non banking finance companies. Bank of India, another major public sector bank, has altogether stopped giving credit to the NBFC sector. "We are a little reluctant to finance NBFCs because of uncertainty prevailing in this sector," said a top BoI bank official. The bank has a credit exposure to about 90 and odd top and medium-level non banking finance companies. The south-based public sector banks like Canara Bank and Corporation Bank have also decided to go slow on lending to the NBFC sector even though they do not advanced significant amount to the segment. Corporation Bank's exposure in the sector is hardly two per cent of its total credit portfolio. "We have been very cautious from the beginning itself," said a bank official.
Copyright © 1998 Indian Express Newspapers (Bombay) Ltd.
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