Bank lending to NBFCs halves to ₹15.5 L crore

AFTER the November 2023 Reserve Bank direction mandating banks to increase their riskweighted capital by 25 percentage points for their exposure to non-bank lenders, banks' credit growth exposure rate to these shadow banks almost halved to 15.3% as more and more NBFCs are depending on mutual funds to raise debt, which on an annualised basis rose to 14.76% in March 2024 from 12% a year ago.

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Even as better rated NBFCs are moving away from banks for funds to MFs, the credit exposure of banks to NBFCs rose 15.3% to 15.5 lakh crore in March 2024, which is only half of the growth rate reported in March 2023 when it was 2530%, Care Ratings said in a weekend note. The average expansion in banks' advances to NBFCs has also come down to around 19% in March 2024, from 23-25% average growth in the previous 12 months.

Additionally, the growth rate of advances to NBFCs has also been below the overall bank credit growth since December 2023 primarily due to the RBI increasing risk weights and elevated capital market borrowings. Another reason is the RBI increasing the risk weights and rising capital market borrowings, the agency said.