In all theses 9+ years of Consulting and Training for NBFCs/ Banks / HFCs in Retail lending my constant refrain has been that credit risk needs to uncover liquidity risks more than solvency. If liquidity is maintained solvency will follow but the reverse is not true. Post Covid19, the industry is in a swift transition – from plenty of money, plenty of customers, plenty of products and opportunities to finance, to, scarcity of money, scarcity of eligible customers and scarcity of products to finance as good customers hold back buying/ investments /taking in additional liability given the uncertainty of the environment. Credit professionals need to strongly focus on liquidity from operations in selecting customers whilst managing in such scarcity. There are distinct indicators which tell us India is moving from a liquidity crisis to a solvency crisis for NBFCs/ HFCs. The larger ones with strong parentage may pull through but the medium and small ones will find the going very very tough and need to rework their strategies.
#finance #nbfcs #liquidity #creditrisk #HFCs

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