The Reserve Bank of India (RBI) and the Securities and Exchange Board of India (Sebi) on Sunday sought to assuage apprehensions among investors when it indicated that actions might be taken, if necessary, to stabilise the stock markets.
“The Reserve Bank of India and the Securities and Exchange Board of India are closely monitoring recent developments in financial markets and are ready to take appropriate actions, if necessary,” the apex bank said in a terse statement on Sunday.
The announcement comes after investors were subject to a major scare last Friday when the benchmark Sensex crashed 1500 points from the day’s high over fears of a liquidity crisis enveloping housing finance companies (HFCs) and non-banking finance companies (NBFCs).
While there were rumours that banks may tighten or cut their exposure to NBFCs, news of the sale of debt securities of Dewan Housing Finance by DSP Mutual Fund at a relatively higher yield saw investors press the sales button in the stocks of several HFCs and NBFCs. The markets were also spooked by infrastructure lender IL&FS defaulting on its loans.
It is learnt that the RBI will meet the shareholders of IL&FS on Friday ahead of the company’s AGM.
Meanwhile, SBI chairman Rajnish Kumar said the country’s largest bank will continue to lend to NBFCs.
“Some comments are being attributed to the SBI about the bank being wary of lending to NBFCs. The rumours are baseless. The SBI lends support to NBFCs in the private and public sector within the regulatory policy framework and will continue to do so. In fact, the recent regulatory guidelines on co-lending model opens up further opportunities for collaboration between the SBI and non-deposit taking NBFCs to increase lending to the priority sectors. There is no concern on the liquidity of NBFCs in view of their liquid cash position and availability of committed lines,” Kumar added.
The statement by both the regulators come at a time factors such as a falling rupee, higher oil prices and trade tensions between the US and China have hit sentiment on the bourses. On the other hand, in the money markets, liquidity has been tight because of advance tax outflows and the RBI’s intervention in the forex market.
DHFL on Sunday said it proposed to reduce exposure to commercial papers (CP) as part of an overall borrowing plan and increase hedging activity, days after the shares of the company tumbled up to 42 per cent on massive selling over fears of a liquidity crisis.