The government, at the highest level, is said to be against stepping in proactively to support or save non-banking finance companies (NBFCs), housing finance companies (HFCs), or mutual funds.

Sources in the government closely following the developments said there will be a “moral hazard” if the government bears the cost of risky actions of NBFCs. In its own assessment, the government also thinks that while the current liquidity crunch will impede growth, it is unlikely to lead to a full-blown crisis.

Analysts and market players are, however, extremely worried that the crisis triggered by the IL&FS default last June and now by Dewan Housing Finance Ltd (DHFL) may lead to a contagion and take down other finance companies.

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