Banks remain cautious in lending to NBFCs despite risk weight reversal

Despite RBI's decision to revert risk weights on NBFC loans from April 1, banks continue to exercise caution, limiting credit access to mid-sized NBFCs and MFIs

Banks remain cautious in lending to non-banking financial companies (NBFCs) and microfinance institutions (MFIs) even after the Reserve Bank of India reverted to lower risk weights for such loans, effective April 1.

 

While top-rated NBFCs may continue to have access to bank loans, mid- and lower-rated ones may find it difficult.

 

“The situation is not going to change for midsize and small NBFCs and MFIs. Only top-rated NBFCs will benefit from the reversal of risk weights. Midsize NBFCs like us will not gain anything. Banks will remain cautious while lending,” said a senior executive at a midsize NBFC.

 

The increase