Recent rise in bond yields could spoil growth party for retail NBFCs

Their cost of funds was up 40 basis points year-on-year during the first half of FY18, and could rise further as bond yields continue to head north

The recent rise in bond yields could spoil the growth party for retail non-banking finance companies (NBFCs).  Retail NBFCs such as Housing Development Finance Corporation (HDFC), LIC Housing, Indiabulls Housing and Bajaj Finance, among others. The sector was one of the key beneficiaries of low bond yields and interest rates in the past three years, but now that yields are rising, the companies are likely to see a compression in their net interest margins (NIMs), translating into lower profitability. 

NBFCs' cost of funds was up 40 basis points (bps) during the first half of FY18 over the last fiscal