Not banks, now insurers are biggest source of funds for NBFCs

There has been an almost 126% jump in investments by insurance companies in NBFCs as of March 2015

Insurance companies are now the largest source of funds for non-banking financial companies (NBFCs) as compared to scheduled commercial banks (SCBs), which were earlier their major source of investments.

According to the Financial Stability Report (FSR), there has been an almost 126 per cent jump in investments by insurance companies in NBFCs as of March 2015, compared with investments as of March 2012.

Earlier, SCBs were the major source of funds for NBFCs, followed by insurance companies and asset management companies. As of March 2014, Rs 2.91 lakh crore was raised from SCBs, while Rs 96,500 crore was raised from insurers.

Hence, from insurers there is an 82 per cent rise in investments in NBFCs compared with a year ago.

The report said at around 0.2 per cent of their total assets, the banking sector’s investment in asset management companies (AMCs) and insurance companies was relatively much less compared with the funds raised, which was 6.6 per cent of their total assets as of March 2015.

But, the banking sector continued to be a crucial investment avenue for both AMCs and insurance companies, as nearly 25 per cent and 13 per cent of their respective assets under management (AUM) were held in the form of investments in the banking sector.

The report showed that insurance companies were one of the major sources of fund-raising for banks, with four per cent of total assets raised from insurers.