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A mega package is in the works to bailout all shadow banks

As per reports, India’s finance ministry has asked the RBI to buy out the bad loans of the top 25 non-banking finance companies (NBFCs). An RBI review in December 2018 found out that the NBFCs were the largest net borrowers from the financial system, with gross payables of around ₹ 7.46 trillion. The highest funds were received from the commercial banks, followed by mutual funds and insurance companies.

In comparison to its high level of payables, NBFCs had gross receivables of only ₹ 56,000 crores. Ever since the DHFL and IL&FS crisis hit, the shadow banks have been hit with a liquidity crisis leading to negative credit growth stalling many housing projects and depriving the MSMEs of capital to grow their business.

A government official who declined to be named also said that the government has asked the RBI to provide a one-time waiver to banks from classifying some real estate loans as bad loans.

However, the RBI is dead against buying out toxic assets of the non-banking finance companies which will basically be a kind of quantitative easing measure initiated by the Federal Reserve of United States during the great financial crisis of 2008-09. More discussions on the matter is going on.

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