Non-banking financial companies (NBFCs) are facing a crisis, particularly the smaller ones that are struggling with asset-liability mismatch amid corporate governance issues. Most banks have cleaned up their books and shored up balance sheets but NBFCs, which borrow from banks and mutual funds, are in trouble. Debt schemes of several mutual funds have seen their net asset value erode. The promoters, who had pledged shares of their firms to borrow money, are neither able to borrow more to complete projects nor sell them to others. They are entering into “standstill agreements" with banks and mutual funds to ensure those shares are not sold and they continue to run the firm.

Source: Mint May 07, 2019 15:33 UTC