NBFCs diversify funding sources
To be sure, bank borrowings continue to grow faster than those from market sources. The market, as in the case of other companies, has been more conducive for larger and well-rated non-banks.
Non-bank financiers are steadily increasing market borrowings to diversify their funding sources even though they remain heavily dependent on bank loans, showed data from the Reserve Bank of India (RBI).
Between June and September last year, non-banking financial companies’ (NBFCs’) share of market borrowings rose from 41.8% to 42.7%, while the share of bank borrowings grew from 29.7% to 31.2% in the same period. This comes after several quarters of decline in share of market borrowings for NBFCs.
“As the Reserve Bank required NBFCs to adopt a Liquidity Risk Management Framework from December 2020, NBFCs gradually swapped their short-term borrowings for long-term borrowings with the aim of maintaining adequate liquidity. In 2020-21 (up to September), share of both market and bank borrowings inched up,” a central bank report said on December 29.
According to RBI, between April and September, overall bank exposure to NBFCs continued to grow due to higher direct lending by banks as well as their investments in debentures. The latter, RBI said, was shored up by ample liquidity and the return of market confidence with the Partial Credit Guarantee Scheme (PCGS), Targeted Long-Term Repo Operations (TLTRO) and Special Liquidity Scheme (SLS).
To be sure, bank borrowings continue to grow faster than those from market sources. The market, as in the case of other companies, has been more conducive for larger and well-rated non-banks.
Mahindra Finance had 28% of its borrowings in the form of bank loans in the June quarter of FY21. In the September quarter, it was down to 26%. However, outstanding bank loans to non-bank financiers have declined between March 27 and November 20, showed RBI data.
