Small NBFCs saving cash

The pandemic has also forced these companies to relook at their loan portfolios, trying to dump wholesale loans in favour of retail ones.

As liquidity becomes limited in the wake of the Covid-19 pandemic, small and mid-sized non-bank financiers are going extremely slow on new loans, to a point when it is almost down to a trickle.

Another NBFC, Edelweiss Financial Services has resorted to selling down its wholesale loans and is looking to reduce it to zero in two years. (Bloomberg)

The pandemic has also forced these companies to relook at their loan portfolios, trying to dump wholesale loans in favour of retail ones. This shift was seen even in banks after the last bout of bad loans and this time around it is the reluctance of banks to fund wholesale non-bank financiers that is leading to this shift.

For instance, the likes of IIFL Finance and Edelweiss Financial Services want to completely exit the wholesale loan business in the next couple of years by down-selling these assets. Nirmal Jain, chairman and chief executive, IIFL Finance told Mint in an interview that the NBFC industry is reorganising itself. “Things are not very easy,” said Jain.

Another NBFC, Edelweiss Financial Services has resorted to selling down its wholesale loans and is looking to reduce it to zero in two years. Its wholesale loan book has shrunk 28.5% sequentially and 41% on a year-on-year basis to Rs 8,393 crore in the March quarter.