Chinmaya IAS Academy – Current Affairs Chinmaya IAS Academy – Current Affairs
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State Bank of India (SBI) has decided to triple the target for loans it purchases from non-banking finance companies (NBFCs). The move is expected to provide much-needed liquidity to these entities. SBI had earlier planned to buy Rs. 15,000 crore worth of portfolio from NBFCs. It has now decided to raise the purchases by another Rs. 20,000 crore to Rs. 30,000 crore. “Bank [SBI] had initially planned for a growth of Rs. 15,000 crore through portfolio purchase in the current year, which is now being enhanced. As per the bank’s internal assessment, there may be an opportunity to buy additional portfolio of Rs. 20,000 crore to Rs. 30,000 crore,” SBI said in a statement. The lender said it had decided to step up the target for purchase of good quality portfolio of assets from NBFCs as it believed that there was a good opportunity to expand its loan portfolio at attractive rates. Eyeing opportunities “The bank is looking for opportunities both in priority and non-priority sectors,” SBI added. Last month, SBI had said that there should not be any concerns over the liquidity position of NBFCs and assured that it would not curtail lending to them. The NBFC sector is facing a liquidity crunch since the IL&FS crisis broke out a month ago. Facing a cash crunch, IL&FS defaulted on loan repayment, which made banks wary of lending to NBFCs. Since liquidity has tightened due to increased loan demand in the festive season, interest rates, too, hardened. Since NBFCs depend heavily on banks for funds, they also have to contend with higher interest rates. As a result, some of the NBFCs have decided the increase the cost of funds to customers. On Tuesday, Indiabulls Housing Finance decided to increase interest rates on home loans by 20 basis points.
