The percentage share of funds deployed by mutual funds in commercial papers (CPs) of non-banking financial companies (NBFCs) fell to 3.2 per cent of debt assets under management (AUMs) in September. This figure stood at 9.5 per cent in September 2018, according to a report by CARE Ratings.
Investments in CPs of NBFCs remained flat month-on-month in September at Rs 50,000 crore, nearly half the previous year’s amount. Investment by debt funds in corporate debt also remained flat in September at Rs 80,000 crore.
The proportion of CPs and corporate debt deployed together in NBFCs as a percentage of total debt funds witnessed a declining as well — to 8.8 per cent in September from 13.8 per cent a year ago. The proportionate share of debt AUM in the overall MF pie improved to 49.9 per cent in September, compared with 45.5 per cent the previous year.
It was 47.7 per cent in March.
In absolute terms, banks’ outstanding to NBFCs grew 46.3 per cent to Rs 8 trillion in September from Rs 5.5 trillion in September 2018. This data, however, does not include liquidity made available to NBFCs by banks via the securitisation route.
The overall composition of NBFCs in bank credit increased from 6.9 per cent in September 2018 to 8.7 per cent in September 2020. However, growth in bank credit to NBFCs has registered a downward trend due to the base effect and risk aversion due to the Covid-19 pandemic.
Total monthly funds raised by NBFCs from the primary market stood at Rs 20,000 crore in September compared with Rs 80,000 crore in March 2019, as banks became the biggest source of their financing needs following the NBFC crisis. “The liquidity covers of NBFCs will be largely dependent on collections and the ability to raise resources during these challenging times. However, amidst this tough time banks have been lending more to them increasing their overall exposure to NBFCs,” the CARE report observed.
The weighted average yield of corporate bond issuances rose by 7 basis points in September over the previous month to 7.81 per cent. This was 64 bps higher than in April (7.17 per cent).
On the other hand, the cost of borrowing for NBFCs fell by 97 bps (month-on-month) to 4.96 per cent and 323 bps YoY, whereas that of HFCs increased by 63 bps month-on-month to 6.04 per cent and fell by 131 bps YoY.