CEA Krishnamurthy Subramanian cautions NBFCs on ‘zombie lending’ - Times of India

NEW DELHI: After a series of NBFC collapses, the government on Thursday cautioned against “zombie lending”, advising them to follow prudential measures to ensure that risks do not mount “While regulators are mandated to monitor these things, at an individual level, NBFCs need to monitor its rollover risk and interconnected risk as well, because in times like these, prudential measures must be taken by each NBFC to ensure that risks do not mount,” chief economic adviser Krishnamurthy Subramanian said at a Ficci conference. He also cautioned against rollover risk or the asset liability mismatch and interconnected risk.
India has been plagued by the collapse of NBFCs such as IL&FS and DHFL, which lent without proper security and hid bad debt on books, prompting the government and the RBI to step in to prevent systemic risks.
“Forbearance is necessary at this point of time but the previous episode of 2008-09 illustrates very well the kind of zombie lending that continued… evergreening happened that basically came back to really bite three-four years later,” Subramanian said.