Govt's Steps To Simplify NBFCs Lack of Liquidity Too Short-term: Fitch Report

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As per the latest reports, the government is awaiting to facilitate partial credit guarantee to the banks in the public sector on their purchase of assets from the NBFCs can simplify funding burden only for the short-term. The government has explained in the budget that to buy high-appraised pooled resources of financially healthy NBFCs, amounting to Rs. 1 trillion during the present financial year, it will support a one-time six months’ partial credit guarantee to the banks in the public sector for their first loss of up to 10 percent. This initiative, however, doesn’t resolve investors' long-time worries about the vulnerability of NBFCs to disrupted real-estate, rating agency Fitch explained in a report. As per the agency, “This provided guarantee is sufficient to reimburse typical losses. The government will cover approximately Rs 1 trillion of issuance. We anticipate that this will also cover their liquidity requirements for about six months. ”