Kotak expects GDP to grow at 7%, says NBFCs more fragile now

Mumbai: India is well poised to grow at 7 per cent, but one needs to be watchful of the non-banking finance companies’ segment which appears to be a lot more fragile now than a year ago due to violent interest rate and liquidity movements during the year, billionaire Uday Kotak said in a New Year message to his staff.

“I do believe that the NBFC sector is more fragile than what it was one year ago and therefore one has to watch that space carefully in the New Year,” Kotak said in a note to employees. “We’ve seen challenges to banks’ balance sheets, 11 public sector banks are under prompt corrective action and all these challenges are still playing out.”

NBFCs as an industry was shaken in the last quarter of 2018 after Infrastructure Leasing & Financial Services Ltd (IL&FS) defaulted on loans and bond repayments. That led to a surge in outflow of funds from mutual funds. Many NBFCs were on the verge of default and had to sell assets to remain liquid.