{"id":139438,"date":"2021-10-07T11:09:24","date_gmt":"2021-10-07T05:39:24","guid":{"rendered":"https:\/\/blog.forumias.com\/?p=139438"},"modified":"2021-10-12T16:49:14","modified_gmt":"2021-10-12T11:19:14","slug":"sreis-fall-and-the-sorrysaga-of-shadow-lenders","status":"publish","type":"post","link":"https:\/\/forumias.com\/blog\/sreis-fall-and-the-sorrysaga-of-shadow-lenders\/","title":{"rendered":"Srei\u2019s fall and the sorrysaga of shadow lenders"},"content":{"rendered":"\n
What is the news?<\/strong><\/h5>\n

After the 2018 collapse of IL&FS and 2019 collapse of DHFL, the Reserve Bank of India (RBI) has added the Kolkata-based Srei Group to the country\u2019s list of failed non-bank lenders.<\/p>\n

The regulator superseded the boards of two non-banking financial companies (NBFCs), Srei Infrastructure Finance Ltd and Srei Equipment Finance Ltd.<\/p>\n

To manage them, RBI appointed an administrator,<\/strong> under whose charge it would like their insolvency to be resolved through India\u2019s bankruptcy code, for which it has sought approval from the National Company Law Tribunal (NCLT).<\/p>\n

Why RBI took this step?<\/strong><\/h5>\n

RBI has cited governance concerns and defaults,\u00a0<\/strong>for its latest decision.<\/p>\n

As the effects of an economic slowdown after 2017-18 began to impact our financial system, several loans were bound to go bad and expose vulnerabilities that had stayed hidden. The collapse of infra-lender IL&FS impacted Srei too. Then the COVID struck, and project disruptions added to its problems. Presently, Srei owes about \u20b9<\/span>30,000 crore to banks alone<\/strong> and then there are bond-holders too.<\/p>\n

Moreover, as seen in earlier cases, a lender\u2019s collapse could have a domino impact on the finances of others<\/strong>, which in turn can destabilize credit markets.\u00a0<\/strong><\/p>\n

Hence, a pre-emptive call has been made by RBI to yield an acceptable outcome in this case as with DHFL, which faced similar action, and was eventually acquired by the Piramal Group.<\/p>\n

What are the reasons behind the NBFC crisis in India?<\/strong><\/h5>\n

At the core of our NBFC crisis has been a big mismatch in borrowing and lending tenures<\/strong>, with short-term funds deployed for longer-term loans.<\/p>\n

Now that RBI has NBFCs under watch to a greater extent than before, assets and liabilities should not be allowed to get so badly misaligned again. Nor, for that matter, should favours be extended in the guise of loans.<\/p>\n

Source<\/strong>: This post is based on the article \u201cSrei\u2019s fall and the sorrysaga of shadow lenders<\/strong>\u201d published in Livemint<\/strong> on 6th Oct 2021<\/strong>.<\/p>\n","protected":false},"excerpt":{"rendered":"

What is the news? After the 2018 collapse of IL&FS and 2019 collapse of DHFL, the Reserve Bank of India (RBI) has added the Kolkata-based Srei Group to the country\u2019s list of failed non-bank lenders. The regulator superseded the boards of two non-banking financial companies (NBFCs), Srei Infrastructure Finance Ltd and Srei Equipment Finance Ltd.… Continue reading Srei\u2019s fall and the sorrysaga of shadow lenders<\/span><\/a><\/p>\n","protected":false},"author":10328,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"jetpack_post_was_ever_published":false,"footnotes":""},"categories":[3127,9],"tags":[8716,928,10203],"class_list":["post-139438","post","type-post","status-publish","format-standard","hentry","category-economy","category-public","tag-money-and-banking","tag-nbfc","tag-nbfc-crisis","entry"],"jetpack_featured_media_url":"","views":{"total":0,"cached_at":"","cached_date":1704883114},"jetpack_sharing_enabled":true,"_links":{"self":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/posts\/139438","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/users\/10328"}],"replies":[{"embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/comments?post=139438"}],"version-history":[{"count":0,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/posts\/139438\/revisions"}],"wp:attachment":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/media?parent=139438"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/categories?post=139438"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/tags?post=139438"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}