After signs of doubt in the credit markets on Friday, where the secondary market sale of debt securities of DHFL (Dewan Housing Finance Ltd) plunged the equity market, the regulators and Finance Minister Arun Jaitley came forward to assure the investors that the markets were being closely monitored.
"The Reserve Bank of India and the Securities and Exchange Board of India are closely monitoring recent developments in financial markets and are ready to take appropriate actions, if necessary," said the RBI and SEBI in statements released by them simultaneously.
This was followed by FM Jaitley's tweet on Monday, that said, "The Government will take all measures to ensure that adequate liquidity is maintained/provided to the NBFCs, the Mutual funds and the SMEs."
The Government will take all measures to ensure that adequate liquidity is maintained/provided to the NBFCs, the Mutual funds and the SMEs.— Arun Jaitley (@arunjaitley) 24 September 2018
Before the sudden fall in the markets and especially the share prices of Non-Banking Financial Companies at around 1 pm on Friday, there was a sense of nervousness looming among investors over the series of defaults by Infrastructure Leasing & Financial Services Ltd (IL&FS). It defaulted on inter-corporate deposits, commercial paper and a Letter of Credit facility of IDBI Bank, despite being an AAA rated entity till August (it is now downgraded to default). Further, this impact is being expected on mutual funds, insurance and pension funds holding IL&FS debt securities.
A Bloomberg report said that the RBI has called for a meeting with the shareholders of IL&FS on 28 September to discuss the defaults reported by the group and its subsidiaries and a capital infusion plan.
On concerns over whether funding to NBFCs would slow down, the SBI chairman Rajnish Kumar on Sunday issued a statement saying, "Some comments are being attributed to SBI about the Bank being wary of lending to NBFCs. The rumours are baseless. SBI lends support to NBFCs in private and public sector within the regulatory policy framework and will continue to do so."