Even as the debt fund crisis continues to make investors jittery, the government may not intervene unless there is a systemic risk, said Chief Economic Advisor (CEA). The recent turmoil in the debt market has been caused by the ‘irrational exuberance’ of the mutual funds and NBFCs, said Krishnmurthy Subramanian, adding non-banking entities must properly evaluate the lending quality.
Even though mutual funds and NBFCs can’t act like banks, they were pushed towards lending as banks failed to do their duty, he also told ET Now in an interview. The asset-liability mismatch in the financial sector must be closely supervised, he noted. Furthermore, there is a need to improve the disclosure framework for defaults, as embattled non-banking financial companies (NBFCs) face a liquidity squeeze and rating downgrades, he add
