The Insight Series: The Transmission Conundrum

By Omidyar Network India & CRISIL

The perception of risk is hard to shake off. So hard that not even Rs 5.75 trillion of liquidity released by the Reserve Bank of India (RBI) in the past fiscal to firefight the Covid-19 pandemic and maintain soft interest rates could mitigate the three-year long, twin ordeals of a crucial cog in the Indian financial system  -non-banks.

Rising borrowing costs and limited funding availability have been the bugbear of non-banks since the IL&FS crisis began in September 2018 and through the current pandemic. The double whammy has been particularly harsh for smaller non-banks focused on retail assets. Despite lower interest rates in the market, their average cost of borrowing has risen 120-150 basis points (bps) between fiscals 2018 and 2021, a CRISIL Research analysis shows.

The second Covid-19 wave has likely intensified the pressure points on them, so a lot more needs to be done by way of support, at warp speed.

Read our report below to find out our suggestions in the 'The Transmission Conundrum' which is the first paper of"The Insight Series"- a joint initiative by Omidyar Network India & CRISIL.

You can also download the report as a PDF here.