Mumbai: A raft of government measures aimed at giving banks and shadow lenders the comfort of federal guarantees while financing small businesses should help increase fund flows to the micro, small and medium enterprises (MSMEs) — businesses that generate jobs in the hinterland and plug key supply chain gaps at giant companies. Furthermore, direct liquidity flow of Rs 30,000 crore to investment-grade NBFCs and partial credit guarantees to low-rated NBFC papers worth Rs 45,000 crore should help resolve near-term liquidity issues of the NBFC sector. “We see this as a positive for banks and NBFCs having sizable exposure to SMEs, as the measures will reduce asset quality risk in the SME segment,” said Pradeep Agrawal, analyst, PhillipCapital. “Moreover, investment-grade NBFCs are given special liquidity lines, which will encourage banks and mutual funds to invest in relatively low-rated paper at a time when liquidity has dried up in this segment due to risk aversion.” Beneficiaries of the federal measures include DCB Bank, Federal Bank, City Union Bank, Shriram City Finance, Shriram Transport, Cholamandalam Investment and Magma, Agrawal said. Shriram City Finance has an exposure of 57 per cent to SMEs while DCB Bank and City Union Bank’s loans to SMEs are… Read full this story
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