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NBFC Funding
With most non-bankers reaching the maximum funding cap from banks, their projected 16 per cent loan growth may be impacted, leading to margin compression for the sector this fiscal, according to a report. Bank funding to NBFCs has grown rapidly to Rs 13.1 lakh crore in February 2023 from a low Rs 3.9 lakh crore in FY17, growing at a CAGR of 22 per cent, which is double the overall bank credit growth, an India Rating report said. The rising share of bank funding has helped NBFCs offset the sluggishness in capital markets, which remained lukewarm during the pandemic and pricey during the first nine months of FY23, it added. Non-banks, including housing financiers, will face increased funding challenges in FY24, which is likely to impact their loan growth target that was earlier projected to clip at 16 per cent, the agency said without quantifying the impact or how much will be the loan growth. According to the agency, the only silver lining is the exit of the largest NBFC, the mortga
Difficulties in getting funding will halve the non-bank lenders' asset growth to around 10 per cent in the second half of the current fiscal, a report said. The asset quality of retail loans is resilient, but the NBFCs' (non-banking finance companies) non-retail book has to be monitored for potential stress, domestic rating agency Crisil said in its report Wednesday. The report comes amid difficult times for the NBFCs, which started with the crisis at infra lender IL&FS, which extended to worries for the entire sector. Many were found to have borrowed short for long-term assets, resulting in asset liability mismatches that rattled investors. The borrowings were from investors such as mutual funds, who have turned wary and have increased the rates at which they want to lend. Crisil said while the liquidity issues are easing slowly, disbursements by NBFCs have gone down by 20-40 per cent, with a more cautious approach taken by the non-retail segments. The NBFCs, ...
Stocks of non-banking financial companies (NBFCs) and housing finance companies (HFCs) continued to trade in the red on Monday, for a consecutive session. Stocks of many HFCs fell 5-10 per cent and those of NBFCs by up to eight per cent. Worries over net interest margin (NIM) and balance sheet growth, amid expected challenges in funding growth at reasonable cost, are weighing on the stocks. Though liquidity is also a problem, analysts do not see this as serious a concern as compared to pressure on NIMs.After the IL&FS issues, experts believe lenders to NBFCs and HFCs will be more cautious, raising the cost of funds and thus putting pressure on NIMs. Many NBFCs have 37-46 per cent exposure to market borrowing (other than banks); it is higher (53 to 59 per cent) for HFCs. Anil Gupta, head for financial sector ratings at ICRA, expects a 10 basis points (bps) rise in cost of funds to impact the NIMs of NBFCs, including HFCs, by six to eight bps, depending on their leverage ...