More measures for NBFCS, stock markets on the cards
The Centre is considering additional policy measures for non-banking financial companies (NBFCS), along with regulatory changes, to ensure stability of the financial market, according to government sources.
This follows Finance Minister Nirmala Sitharaman’s interaction with the country’s top regulators at a Financial Stability and Development Council meeting on Thursday.
Shaktikanta Das, governor of Reserve Bank of India, as well as Ajay Tyagi, chairman of Securities and Exchange Board of India, participated in the video-conference.
The sources said a substantial part of the meeting was focussed on the continuing volatility in the securities markets, and the liquidity issues faced by NBFCS and housing finance companies (HFCS) amid the pandemic and lockdown, which has affected all sectors.
Over the past few months, the government, the RBI and Sebi have already announced measures aimed at various sectors and financial markets.
In Thursday’s meeting, Sebi is said to have recommended strategies to increase domestic investment in the financial markets, along with ways to enhance capital flow into equity markets. “Increasing participation of domestic investors increases the linkage between domestic markets and foreign investors, which prevents excessive volatility,” said a person privy to the discussion, adding that a need for additional domestic resource mobilisation was also discussed.
RBI representatives, meanwhile, raised concerns over liquidity challenges being faced by NBFCS, and various state and micro finances.
The central bank also raised the issue of debt markets, particularly of secured and unsecured non-convertible debentures, which assumes significance because several firms have reached out to the RBI and Sebi seeking relief given some of them raised significant amounts through NCDS, which are close to maturity.
The RBI apprised Sitharaman and finance ministry officials of challenges being faced by banks regarding the special liquidity window, to help MFS meet redemption pressure.
“The FM asked regulators to ensure their respective regulated entities survive the economic impact of the pandemic and lockdown,” said a second official.
“The meeting reviewed the current global and domestic macroeconomic situation, financial stability and vulnerabilities issues, major issues likely to be faced by banks and other financial institutions, as well as regulatory and policy responses. Market volatility, domestic resource mobilisation and capital flows issues were also discussed by the Council,” said an official release after the meeting.