NBFCs get some breather with Budget: XLRI professor

Jamshedpur, July 5 : Dr. H. K.Pradhan, professor of finance and economics at XLRI � Xavier School of Management said, � I expect lower internal borrowing, as the Government wishes to tap low cost long term external debt. With a sustainable debt-to-GDP ratio of 68 percent and USD 426 billion reserves, India enjoys an excellent external credit rating, which would enable us to tap long term loans and at lower interest rates.  Already several government agencies are borrowing through off-budget route for their capital expenditure. These will release some liquidity in the domestic capital markets, which would soften the yields that have already fallen following three repo rate reduction of 25 basis points each.

He went on to add that non banking finance companies (NBFC) got some breather as banks and mutual funds are encouraged to lend, at least to those having sound financial position, with the government providing kind of backstop facility in the form of one-time credit guarantee to the public sector banks  for their first loss upto 10 percent, removing the creation of debenture redemption reserve (DRR), and strengthening the regulatory authority of RBI over NBFC.