IGI Logo

Crisil Ratings in its latest report has said that Non-banking financial companies (NBFCs) are likely to witness close to Rs 18 lakh crore of their outstanding debt getting repriced at higher levels in FY23 amid the rising interest rate scenario. It said borrowing cost of NBFCs are expected to become costlier by 85-105 basis points (bps) in this fiscal owing to recent hikes in repo rate by 90 basis points in two tranches and an expected rise of another 75 bps in the remaining fiscal.  

The agency said an analysis of its rated NBFCs shows, Rs 15 lakh crore of debt, or around 65 per cent of outstanding debt as on March 31, 2022, is due for repricing this fiscal owing to interest reset or maturity. Another Rs 3 lakh crore of incremental debt is likely to be raised to support expected growth in lending. Banks remain a major funding resource for NBFCs. The share of banks in NBFCs' total borrowings has increased to 34 per cent in March 2022 from 27 per cent in March 2018. The agency said the impact of rate hikes will vary based on the mix of fixed and floating rate borrowings in NBFC portfolios.

The report said ‘Our study shows increases or decreases in MCLR over the past five fiscals have not kept pace with the changes in the repo rate. At the same time, interest rates on repo-linked bank facilities do reflect such changes very quickly.’ It said in home loans, constituting 35-40 per cent of Assets Under Management (AUM), NBFCs should be able to pass on the higher rates to both existing and new clients since lending rates here are primarily floating in nature. But this rise won't be to the same extent as the increase in borrowing costs, amid intensifying competition from banks.