NBFCs to tweak funding mix after RBI relaxes banks’ lending norms, ET BFSI

Indian non-banking financial companies (NBFCs) are more likely to tweak their funding sample within the upcoming monetary yr, because the Reserve Bank of India‘s rest of some lending norms might nudge banks to extend funding to this phase.

The RBI partially reversed tighter guidelines for bank loans to NBFCs, trimming danger weight necessities for banks on shopper microfinance loans by 25 proportion factors to 100% and successfully reverting to the sooner danger weight necessities.

This may “unlock capital for banks, permitting them to lend extra to NBFCs,” stated George Alexander Muthoot, managing director, Muthoot Finance, including that this will even make financial institution funding extra enticing for NBFCs.

NBFCs had resorted to short-term industrial papers (CP) for his or her money wants as funding from lenders tightened following the implementation of the earlier rule, resulting in their share of total CP issuance leaping.

The lending corporations’ share of CPs has remained round 40% or larger within the final seven quarters, up from lower than 30% in earlier quarters, in accordance with knowledge from Crisil Intelligence.

Bhushan Kedar, director – mounted revenue analysis at Crisil Intelligence anticipates the pattern altering.

“For NBFCs, the funding combine is predicted to endure change within the subsequent yr, and they might need to faucet loans, particularly with anticipated price cuts, to widen their funding pool… The funding combine will change, and it might change extra for some firms, relying on banks’ preferences.”

Indian lenders would start by lending extra to giant and highly-rated names, earlier than shifting in direction of the lower-rated corporations because the yr progresses, a banker stated requesting anonymity as he was not authorised to talk to media.

Nevertheless, the shift in NBFCs’ borrowing combine will not be quick. “It might take a while earlier than banks resume lending to NBFCs at earlier ranges. It might take six to 9 months, relying on how RBI guides banks on NBFC lending,” stated Kishore Lodha, chief monetary officer at UGRO Capital.