Mumbai: India’s shadow banks are likely to see a further squeeze on their profit margins after the Reserve Bank of India signaled it will tighten liquidity requirements to bring them in line with the country’s more closely regulated commercial banks. If implemented, the draft guidelines could hit the NBFCs’ margins and business growth, Singh added. India’s shadow lenders have been under pressure since last year, when a series of defaults by Infrastructure Leasing & Financial Services forced the government to intervene and exposed weaknesses in the sector. Since then, the banks and mutual funds which provided funding to the NBFCs have reduced their exposure, creating a cash crunch which caused the shadow lenders to sell assets and restrict new loans. Average yields on top-rated five-year bonds issued by NBFCs climbed 16 basis points in April, the biggest monthly gain since June 2018.

Source: Mint May 28, 2019 00:45 UTC