CFA Institute Live Webinars Presentation Recorded 07 Nov 2019
Practitioners' Insights: India's NBFC crisis - opportunities and risks
The NBFC (Non-Banking Financial Company) crisis started with the failure of one of the most respected NBFCs in India, IL&FS, followed by struggles at DHFL, Reliance Capital, and the latest, Altico. This NBFC crisis is unique in the sense that it is both a driver and a reflection of the economic slowdown. NBFCs create credit especially among those segments of the population to whom banks are sceptical in extending loans, because of their risky credit profile. They fund consumer white goods, motorcars, and houses (including housing finance companies in the ambit of NBFCs), which creates demand in the economy. As NBFCs struggled in the wake of a general wave of fear relating to the sector after the IL&FS crisis, banks cut down on their NBFC exposures, further exacerbating NBFCs’ funding positions. When lending by and to NBFCs goes down, demand in multiple sectors is affected, creating a vicious cycle.
They say, “You should never let a ‘good’ crisis go waste”, in terms of learning from it. In this webinar, Raghuvir Mukherji, Partner and Chief Risk Officer of IIFL Wealth & Asset Management, will address the following:
• What are the different types of NBFCs?
• What are the root causes of this crisis? Is it an NBFC credit crisis, or is it just a liquidity crisis? Is there is a difference? Are there fundamental issues in the NBFC model in India that need to be looked at and resolved? How are different NBFCs affected?
• Are the new business models to cut costs and leverage technology, like P2P funding, AI-based lending models, and the like more successful?
• What are the possible solutions? What have the government and the Reserve Bank of India done so far? Did reliance on costly and fickle bank funding exacerbate the crisis? Can NBFCs access the bond market? Would a securitization market help NBFCs to broaden their sources of funding and thereby bring more stability? But isn’t securitization a bad word after the financial crisis of 2008/09?
This is the archived version of a live webinar that took place on 07 November 2019
About the Speaker(s)
Raghuvir Mukherji heads Risk Management for IIFL Wealth & Asset Management, looking at enterprise risks across its Advisory, Distribution, Asset Management (mutual funds, portfolio management services and alternative investment funds), Stock Broking, Lending, and Trust businesses. In his last role, he was chief risk officer at Reliance Nippon Life Asset Management Ltd (RNLAM), the largest AMC by assets under management in India.
Mr. Mukherji has around two decades of experience spanning across various domains, viz, commercial banking, securities services, functional consulting for technology companies, and risk management, in organizations like Citi, HSBC, TCS, and Infosys.
Mr. Mukherji is an alumnus of St. Xavier’s College Kolkata, a Chartered Accountant, and Certified Financial Risk Manager (FRM), accredited by the Global Association of Risk Professionals, USA.
Shreenivas Kunte, CFA, CIPM, is a director of continuing education and advocacy at CFA Institute. In this role, Mr. Kunte contributes to thought leadership in the investment profession. He writes on investing topics in leading publications and represents CFA Institute at conferences and forums. Mr. Kunte serves as an external research scholar at the Indian Institute of Technology Bombay. Previously, he worked as the country trading strategist for Citi in Tokyo, Japan. He holds a degree in computer engineering from the University of Mumbai.