Modi government plans early capital infusion as NBFCs liquidity stress rattles financial markets

As the ongoing liquidity crisis of non-banking financial companies (NBFCs) rattles the financial markets, the Indian government has decided to intervene and is currently in the process to prepare a slew of measures to ease the situation The Department of Financial Services (DFS) and top officials in the Ministry of Finance are working closely to prepare the plan, which may include possible advancement of cash infusion in scheduled public sector banks and involvement of SIDBI to infuse liquidity. The proposed measures are likely to be presented at the level of the Prime Minister’s Office and an announcement regarding this is expected to be come shortly. The move to ensure that liquidity conditions remain orderly in the markets comes amid worries on NBFCs’ approximately Rs 1 lakh crore worth of debt papers, which are coming up for redemption by March 2019. On the other hand, raising debt through commercial paper and corporate debt market has also become difficult.

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