CRISIS IN NBFC SECTOR COULD HURT ECONOMIC GROWTH’
23, May 2019
Prelims level : Economics Mains level : Technology, Economic Development, Bio diversity, Environment, Security and Disaster Management
Why in News:
- The investors are worried over potential impact on the overall growth of the economy in the near term on current liquidity crisis in the non-banking financial companies’ (NBFCs).
- “Many investors appear concerned about the ongoing financial crunch led by the NBFC sector and its impact on discretionary consumption and hence overall growth.
- High risk aversion, delayed monetary transmission and subdued mutual fund flows could result in a further slowing of the sector.
- NBFC – An NBFC is a company registered under the Companies Act, 1956.
- It engages in the business of loans and advances
- acquisition of shares/stocks/bonds/debentures/securities issued by Government or local authority or other marketable securities of a like nature
- leasing, hire-purchase, insurance business, chit business, etc. NBFCs largely depend on market-based funds.
- They aim at bridging the gap in pricing inefficiency based on perceived risk.