NBFC stocks cheer RBI decision on lending norms

Positive Sentiment

- Anupreksha Jain Mumbai, February 27

Shares of Non-Banking Finance companies (NBFCs) rose sharply on Thursday in response to Reserve Bank of India's (RBI) decision to ease lending norms for the banking sector. Experts said that it will help NBFCs to borrow from banks at a lower cost, as the spread over marginal cost of lending rate (MCLR) is expected to ease. However, the return to original risk weight is likely to help only higher-rated NBFCs while the situation could remain tight for low-rated NBFCs, experts added.

"It will improve the overall credit flow to NBFCs as cost of capital will automatically come down for banks. While the MCLRs won't be affected, but the spread which you charge over the MCLR would come down," said Madan Sabnavis, chief economist at Bank of Baroda.