Bank Credit And Mutual Fund Exposure To NBFCs See Double-digit Growth in March

Banks' outstanding credit to NBFCs rose by 10.4% y-o-y to Rs.10.5 lakh crore due to improvement in economic activities, the renewed focus of banks on NBFCs as it shows growth visibility and improvement in the balance sheet, and credit push by banks as the fiscal year ended, CARE Ratings has said in its CAREEdge Report.

In absolute terms, it expanded by Rs.0.99 lakh crore from March 2021. According to the report, the MF debt exposure (CPs and corporate debt) to NBFCs rose by 14.3% y-o-y to Rs.1.7 lakh crore in March 2022 due to the issuance of CPs by the NBFCs for IPO funding requirements and shifting of long-term investment to short-term investments as the market expected hike in interest rate. In absolute terms, it expanded by Rs.0.21 lakh crore from March 2021.

"The credit exposure of the banks to the NBFCs fluctuated around the Rs.9.0 lakh crore mark for the better part of the year and crossed Rs.10.0 lakh crore threshold in December 2021. It continued its upward trajectory in March 2022 as capital market rates hardened and NBFCs turned to avail comparatively cheaper bank loans. However, overall borrowing cost is expected to become expensive given that the RBI has raised rates and bond yields have risen in the capital market," the Care Ratings report has said.