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Banks still cautious on NBFC lending
Business Standard
|May 05, 2025
The RBI reverted to lower risk weights to such loans from April 1
Banks remain cautious in lending to non-banking financial companies (NBFCs) and microfinance institutions (MFIs) even after the Reserve Bank of India reverted to lower risk weights for such loans, effective April 1. While top-rated NBFCs may continue to have access to bank loans, mid- and lower-rated entities may find it difficult.
"The situation is not going to change for midsize and small NBFCs and MFIs. Only top-rated NBFCs will benefit from the reversal of risk weights. Midsize NBFCs like us will not gain anything. Banks will remain cautious while lending," said a senior executive at a midsize NBFC.
The increase in risk weights for bank loans to NBFCs in November 2023 hampered credit flows to the sector. Bank loan growth to NBFCs slowed to 5.7 per cent year-on-year to ₹16.36 trillion as of March 21, 2025, compared to 15.3 per cent growth during the same period the previous year.
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