Jaitley assures on liquidity to mutual funds, NBFCs

The government will take all measures to ensure that adequate liquidity is provided to the NBFCs, the mutual funds and the SMEs, tweeted Finance Minister Arun Jaitley on Monday, reassuring the markets after stock and bond markets were rattled on Friday on concerns over defaults by IL&FS and fears of liquidity tightness in the financial system. India’s banking and markets regulators had also issued a rare joint statement late on Sunday, stating that they are closely monitoring the financial markets and will take appropriate steps, if required, to ensure their smooth functioning.

“The Reserve Bank of India and the Securities and Exchange Board of India are closely monitoring recent developments in financial markets and are ready to take appropriate actions, if necessary,” the statement said.

The regulators’ move to calm investors comes after the BSE’s benchmark Sensex crashed nearly 1,500 points on Friday over a rumoured default by mortgage lender Dewan Housing Finance Ltd (DHFL) and the uncertainty surrounding the future of IL&FS. Shares of other home financiers had also slumped on Friday following the rumours but later recouped some of their losses after DHFL denied that it had defaulted on payments.

State Bank of India chairman Rajnish Kumar also stepped in to reassure investors on Sunday, saying that there was no concern related to liquidity at mortgage lenders. Friday’s slump in the stocks of home financiers was attributed to fears of liquidity tightness and potential systemic risk arising from exposure to IL&FS.

IL&FS is seeking to raise more than ₹ 30,000 crore selling assets to cut debt, Bloomberg reported.

The Sensex was trading nearly over 100 points lower today while Nifty was below 11,100 level. DHFL shares had rebounded today, recouping some of Friday’s losses. They were trading nearly 10% higher in early trade.