Despite RBI move, NBFCs' woes to continue till permanent funding fix found

The nuance that has been lost is whether the move is aimed more to free up the capital of banks or to help loan companies

The Reserve Bank of India’s (RBI) decision to go easy on the risk weights on bank loans to non-banking financial companies (NBFCs) has been cheered all around, but it may well be a case of premature exuberance.
 
Bank credit to “loan companies” – the likes of Bajaj Finance, Manappuram, Muthoot Finance, Muthoot Capital, Shriram City Union — is expected to fall 20-50 per cent from the 100 per cent based on the credit rating; it’s expected this will lower their borrowing costs, particularly for those entities rated “AA” and below. This will bring them on a par with Asset