NBFCs may turn to corporate bond market to fulfill their funding needs

NBFCs have the option to raise funds through commercial papers, but overreliance on short-term debt instruments could lead to an asset-liability mismatch

Non-banking financial companies (NBFCs) could turn to corporate bonds to fulfill their funding needs after the Reserve Bank of India (RBI) announced stricter norms for banks and NBFCs in relation to unsecured lending portfolios, market participants said.

As of March this year, NBFCs predominantly relied on bank borrowings, accounting for approximately 41.2 per cent of their total funding, according to a report by S&P Global Ratings.

The central bank has implemented a 25 per cent increase in the risk weight on banks' credit exposure to NBFCs, in addition to the risk weight already linked to the rating of these non-bank