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Synopsis

• In February 2023, banks’ outstanding credit to non-banking financial companies (NBFCs) rose by 32.4% (y-oy) to reach Rs.13.1 lakh crore. The growth has remained robust due to high growth in the NBFC asset book and as additional borrowings moved to banks due to differentials between market yields and interest rates offered by banks and lower borrowings in the overseas market.

• The Mutual Fund (MF) debt exposure to NBFCs fell by 13.8% y-o-y to Rs.1.42 lakh crore. The share of MFs has been on a consistent declining trend for the last several quarters.

• MFs’ debt exposure to NBFCs has declined further to 10.9% of Banks’ exposure to NBFCs as of the end of February 2023.

Banks O/s Credit to NBFCs Continues its Robust Growth, MFs Pare Exposure

Banks’ outstanding credit to NBFCs rose by Rs.3.2 lakh crore over the last 12 months. On the other hand, MF debt exposure (CPs and Corporate Debt) to NBFCs dropped by 13.8% y-o-y to Rs.1.42 lakh crore in February 2023, while decreasing sequentially by 4.1% from January 2023 levels.

The data in Figure 1 does not include liquidity made available to NBFCs by banks via the securitization route (direct assignment & pass-through certificates) and investments made by banks in the NBFCs’ capital market issuances. Liquidity availed by NBFCs including HFCs through the securitisation route crossed approximately Rs 1.7 lakh crore in FY23

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