NBFCs get funds from MFs amidst low bank funding
Mutual Fund (MF) debt exposure to NBFCs, which includes their subscriptions to Commercial Papers (CPs) and corporate debt has hovered over Rs 2 lakh crore for more than six months. Their outstanding debt exposure touched Rs 2.33 lakh crore in October 2024, a year on year (y-o-y) increase of 47.1 percent. Though the break-up of iexposure to CPs and bonds Is not available, experts say that NBFCs have seen a higher growth in resources raised through bonds than CPs. NBFCs reduced issuances due to concerns on the sustainability of high growth in their loan portfolio, according to Care Edge Ratings.
In comparison, bank lending to NBFCs, which has been a major source of funding for NBFCs rose 6.4% y-o-y growth which has reduced to nearly a third when compared to the growth rate reported in October 2023. Bank lending to the sector has remained in the range of Rs 14-15 lakh crore since November 2023 when the Reserve Bank raised risk weights on bank lending to NBFCs.
NBFCs are increasingly attempting to access funding sources beyond banks,such as non-convertible debentures (NCD), commercial papers (CP), foreign currency borrowings (FCB) and Securitisation according to an analysis by ratings firm Crisil.
The ratings firm said that its analysis showed that the share of NCDs in the sector’s borrowings rose 30 bps (one bps is 0.01 percent) to 28.5 percent in June quarter, in line with the ‘AAA’ and ‘AA’ category rated entities. Those rated in the ‘A and below’ categories are attempting to tap the market too, as a share of
