NBFCs focusing on SME sector for funding opportunities
Published: Jul 17, 2018
By TIOLCORPLAWS News Service
NEW DELHI, JULY 17, 2018: IN May, the Union Cabinet approved an ordinance to amend the IBC allowing promoters of micro, medium and small enterprises to submit their resolution plans during the resolution process under the IBC in accordance with suggestions made by a 14-member insolvency law committee to the ministry of corporate affairs.
It is envisaged that NBFCs would have accelerated pace of growth as public sector banks and the Indian banking system on the whole grapples with a huge pile of non-performing assets and financial frauds. On the same lines, the NBFCs had started to explore funding opportunities for distressed small and medium enterprises. Whilst some NBFCs would be looking to help the promoters of such firms by helping them with one-time settlements, others would be looking to fund the promoter at the bidding stage, as the govt is looking to allow SME promoters to participate as resolution applicants.
Most SMEs would be pitching for one-time settlement, as resolution through IBC would be long-drawn and at the same time many suitors may not be available for the firm on the block. Considering the SME universe is large, NBFCs with a strong SME focus would be looking at funding opportunities in the distressed SME segment as well. Their decision, however, would largely be decided by the quality of assets and collateral along with the Reserve Bank of India's view on such refinancing,” said Nachiket Naik, managing director at IREP Credit Capital Pvt Ltd, a Mumbai-based NBFC. Differential treatment for SMEs for the resolution had been suggested by multiple stakeholders as the firms may not see much interest from bidders and may end up in liquidation, thereby defeating the objective of IBC.
