The NBFC sector has been undergoing a liquidity crunch with a series of defaults of major financial institutions along with its group companies that started since September, 2018.

In order to improve the current situation, Budget 2019 proposes to provide aid to the NBFC’s by providing one-time partial credit guarantee of Rs. 1 lakh crore to public sector banks, for purchase of pooled assets of financially sound NBFC. This will ease out the liquidity crisis of NBFC’s via asset purchases.

In addition, the Budget 2019 proposed for giving RBI overbearing powers over housing finance companies (HFCs) and NBFCs, including the power to change the management at these firms. The Budget has relieved the National Housing Bank (NHB) of its regulatory powers over HFCs and transferred them back to the RBI. The objective is to have one regulator maintain robust supervision & control over all financial transactions.

For assisting this positive change, it is recommended to conduct a systematic and timely examination of the financial transactions and processes as and when it happens or while it happens, to ensure accuracy, authenticity, compliance with procedures & guidelines. It forms a part of an organisation’s early warning system to ensure timely detection of irregularities and lapses.