Mutual funds have contributed about two-fifths of incremental funding to non-banking financial companies (NBFCs) and housing finance companies (HFCs) in the past couple of years. The liquidity crisis after the Infrastructure Leasing and Financial Services (IL&FS) default has changed the dynamics of this funding considerably.
Analysts at Nomura Research point out that mutual funds’ holding of commercial paper (CP) and non-convertible debentures (NCDs) issued by retail asset financiers has increased 14% since end-August. It indicates that this segment has not been impacted by the crisis, but has instead gained.