NBFCs scaling down MSME loans

Mumbai: The liquidity crisis triggered after the default of IL&FS is causing the non-banking financial and housing finance companies to pull back on loans to micro, small and medium enterprises (MSMEs), Moody's said on Wednesday.

"The value of loan against property (LAP), assets under management by HFCs and NBFCs increased by 8.3 per cent over the six months leading to December 2018, down from 15.4 per cent growth over the previous six months," Moody's said.

Moreover, according to Moody's, it does not expect LAP lending by NBFCs and HFCs to pick-up significantly in the next few months too as the operating environment remains challenging for them as they continue to face issues with accessing funds.

"Indian non-banking financial companies (NBFCs) and housing finance companies (HFCs) are pulling back on loan against property (LAP), lending to micro, small and medium sized enterprises (MSMEs) because of the funding squeeze caused by the liquidity crisis in the country's financial sector," Moody's said in a note.