Beneficiaries of the scheme
Three debt bankers with knowledge of the program’s investments told BloombergQuint that aside from a few small NBFCs, it’s mostly well-established AA-rated NBFCs that have raised funds through the program.
The list includes entities involved in housing finance, asset finance, real estate finance, business lending, education and SME lending. BloombergQuint was unable to compile a full list of program borrowers.
The program ultimately ended up creating liquidity for just a handful of large NBFCs, said Raman Agarwal, regional NBFC chair at the Council for International Economic Understanding. “The broader NBFC universe continued to face a crisis during this period. Due to the short duration and the mode of financing, which has always been bonds, CPs or NCDs, small and medium NBFCs have been left out as they generally borrow through term loans and not through loans. bonds,” he said.
Most small and medium-sized NBFCs, Agarwal said, did not need cash to repay their debts, but needed funds to on-lend them. The program, which only provided funds for 90 days, did not help them solve the problem of funding for loans.
A three-month funding program was a no-start as NBFC and HFCs sought longer-term funding as Covid-19 uncertainty had not receded, said Jinay Gala, senior analyst at India Ratings and Research. . Short-term money supply would also show that desperation would send mixed signals about the lender’s health, Gala said.
“No one would want additional ALM (asset-liability management) risk by adding debt to pay off existing debt. NBFC may have benefited from the program because their liquidity has decreased, which means repaying after 90 days would not be difficult for them,” Gala said.
For those who managed to tap into the facility, the cost of funds was around 30 to 50 basis points lower than prevailing market rates, a debt market banker said on condition of anonymity.
While ‘AA’ and ‘A’ rated entities have raised funds from the program at yields of between 7.15% and 9% on their debt securities, entities rated ‘BBB’ and below have raised funds at yields between 9% and 11%, according to data from National Securities Depository Ltd. NSDL data is available for non-convertible debentures, but not for commercial paper.
Since the RBI provided funding at the repo rate of 4%, the trust earned a spread of 315 to 700 basis points beyond the securities it issued to the RBI for funding, officials said. debt market bankers that BloombergQuint spoke to.
SBI Capital Markets declined to comment. Responses to RBI questions sent on Wednesday are awaited.