NBFCs' funding costs to rise as banks cut back
banks squeeze funding to this segment. Recent data show that bank funds to the non-bank segment dropped to 15% in April from 22% seen in the same period last year.
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Non-banks are also likely to face a squeeze on their margins and profitability as they access more expensive sources of borrowing. Bank funding to non-banks accounts for more than half of their overall borrowings.
«Bank loans to non-banking financial companies have decreased sharply after the RBI increased -weighted assets on bank loans to NBFCs,» said Suresh Ganapathy, head of financial services research at Macquarie Capital.
«Banks fund almost 50% of NBFC credit through direct loans and subscription to bonds. So a squeeze in bank funding does have implications for NBFCs growth as well as margin prospects.»
In November last year, the banking regulator directed banks and non-banks to reserve more capital as weights for loans disbursed towards unsecured personal loans, credit cards and lending to NBFCs. This was done to rein in the inordinate rise in such loans.
According to a note by brokerage house Motilal Oswal, margins for vehicle financiers have bottomed out but are expected to remain in that range because of the rising borrowing costs. Housing finance companies have also exhibited compression in their margins, which is putting
