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Among the authorities dealing with the resolution of the IL and FS crisis, Minister of Economic Affairs Injeti Srinivas said on Monday that non-bank financial companies, especially housing finance companies, are experiencing liquidity problems, but there is no "no crisis".
He also stressed the need to review business models in the NBFC sector and adopt a sustainable model.
The IL & FS crisis, triggered by defaults by some of the companies in the group, raised concerns about liquidity in the system, while the corporate affairs ministry last month replaced the board's management board as part of a major effort to contain the situation.
Responding to questions about the liquidity situation, Srinivas said that, in the NBPL segment, the issue is more pronounced in relation to residential financial companies facing liquidity problems.
"I will not come into individual names, but a segment problem … these are large entities in this segment. Some measures have been taken at the macro level.
"This situation should be facilitated, but at the same time … the way in which this sector is implemented by this sector will have to study deeply and adopt a sustainable model that takes into account the resources of the funds, uses them … thus reducing this incompatibility," he said.
He responded to the question whether the report highlighted concerns about the liquidity crisis faced by three leading housing finance companies – DHFL, Indiabulls Housing Finance and PNB Housing Finance.
Given that the liquidity challenges in some companies are more pronounced, Srinivas said that the NBFC sector, which calls for a joint calmdown and at macro level, takes appropriate measures.
"So, I do not see any crisis, but will be dealt with in the short term. In the medium and long term, it will be necessary to study the method of financing and the extension of all these entities. All entities must follow a sustainable enterprise development approach," he said.
The government is working to resolve the liquidity issue throughout the financial system and liquidity of IRBs through bond purchases in the last few weeks.
In the case of the IL & FS, Srinivas said that the investigation of the Serious Fraud Investigation Office (SFIO) has made progress in this area.
"There are more than 300 companies and a lot of issues are being investigated by SFIO," he added.
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