Is the worst over for NBFC shares?
Reserve Bank of India's (RBI) move on Tuesday to lower risk weights for bank lending to these entities. Analysts are however sceptical about any share price rebound sustaining as lenders may not be in a hurry to push up loan disbursals in the wake of tight liquidity conditions, continued stress in existing loans and moderating consumer incomes.
«There could be a slight rally in NBFC stocks thanks to the central bank's decision but a runaway rally may not happen because the overall impact will be seen only in FY26,» said Prashanth Tapse, senior VP of research at Mehta Equities.
RBI Tuesday after market trading hours cut the risk weight for banks on loans to NBFCs from 125% to 100% depending on the rating of the finance company. Lower risk weights mean banks need to set aside less capital for these loans, allowing them to lend. NBFCs experienced a lending slowdown after the RBI tightened norms in November 2023 by increasing risk weights from 100% to 125% to curb bank lending. This aimed to control the surge in unsecured loans, which had grown 25% year-on-year in October 2023.
«RBI's move will only reduce the cost of funding for NBFCs but not significantly impact consumer credit offtake or asset quality. The reduction in funding costs may eventually lead to lower interest rates for consumers, but the immediate impact on stock valuations is uncertain and likely minimal,» said Siddarth Bhamre, head — institutional research, Asit C Mehta.
Analysts advise investors to stick to the top-rated finance companies. Bajaj
