Liquidity issues can still hurt some NBFCs
asset-liability positions by trimming dependence on short-term borrowing and increasing preference for long-term funding sources, but in case of extreme liquidity conditions, 34 firms may face stress, the Reserve Bank of India said.
«The results (of stress scenarios) indicate that the number of NBFCs, which would face negative cumulative mismatch in liquidity over the next one year in the baseline, medium and high-risk scenarios, stood at 6, 17 and 34, respectively,» the RBI said in its December 2023 Financial Stability Report.
Under the RBI's stress scenario, six NBFCs represent 1.3% of the asset size of the sample, 17 non-bank firms represent 10.4% and 34 firms account for 15%, respectively.
Based on five-year data, a study of the asset-liability management profile of the top 50 NBFCs showed that 76% of bonds issued by the non-bank lenders had a residual maturity of up to five years in September 2023, down from 88% in September 2018. This indicates elongation in the maturity of bonds, the RBI said.
Share of short-term borrowing for the 50 NBFCs as a share in total borrowing reduced to 37.3% in September 2023 from 47.7% five years ago.
On the asset front, 67% of loans for the top 50 NBFCs had a maturity of less than three years in September 2023, down from 80% five years back, the RBI said. «Together with their increasing preference for longer term sources of funds, there has also been a shift towards long-term uses of funds.»
The aggregate lending by NBFCs rose by 20.8% on-year in September 2023 from 10.8% a year ago, mainly driven by personal loans and loans to industry.
