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Care Ratings in its latest report has said that banks' lending to non-banking finance companies (NBFCs) rose by a robust 35.1 per cent to Rs 14.2 lakh crore in June 2023, indicating non-banking finance firms' decreased reliance on international borrowings. This also pushed up NBFCs' share in overall credit from 8.5 per cent in June 2022 to 9.9 per cent in the reporting month. 

According to the report, mutual funds' debt exposure to NBFCs, including through commercial papers (CPs) and corporate debt, also increased 14.5 per cent to Rs 1.62 lakh crore in June. MF exposure to NBFCs as a share of debt asset under management has remained broadly constant hovering at around 10 per cent. On the other hand, the share of banks' advances to NBFCs as a share of aggregate advances has doubled from around 4.5 per cent in February 2018 to nearly 10 per cent in June, indicating the reliance of NBFCs on bank lending.

The report also said that bank credit to NBFCs has been consistently moving up since the second half of FY22, coinciding with the phased reopening of the economy since the Covid pandemic. This growth momentum further accelerated in FY23 and in the first quarter of FY24, which can primarily be ascribed to NBFCs' asset base.