Banks' credit exposure to non-banking financial companies rose 23.6 per cent on-year to Rs 13.8 lakh crore in July, pushing up their overall share to 9.3 per cent during the month, an analysis of the RBI's monthly data by a ratings agency showed.
The month also saw lower borrowings from international markets due to the prevailing elevated global interest rates following tightening of monetary policies by global central banks, according to a note by Care Edge.
There has been a consistent upward trend in bank credit to NBFCs in the second half of FY22, coinciding with the phased reopening of the economy after the pandemic. The growth momentum further accelerated during FY23 and in the first quarter of FY24.
However, NBFCs' overall borrowings on a month-on-month basis declined 3.3 per cent, primarily due to the merger of HDFC with its subsidiary HDFC Bank from July 1, Care Edge said.
Mutual funds' debt exposure to NBFCs, including Commercial Papers (CPs) and corporate debt, jumped 60.1 per cent to Rs 1.81 lakh crore in July with CPs crossing the Rs 1 lakh crore-mark for the first time since August 2019, it said.
While large NBFCs depended on the capital markets for funding, mid-sized and smaller ones continued to rely on banks as their primary source of funding.
Mutual funds' debt exposure to NBFCs rose to 13.1 per cent from 10.1 per cent in July 2022, and 11.4 per cent in June 2023, as per the note.
Liquidity availed of by NBFCs, including HFCs, through the securitisation route crossed Rs 55,000 crore in the June quarter.
Compared to February 2018, absolute bank lending to NBFCs has jumped by about 3.5 times, while Mutual Fund (MF) exposure has come down by 21.7 per cent over the last five years due to risk aversion by fund houses.
Interestingly, MF exposure to NBFCs as a share of debt AUM has remained broadly constant around 10 per cent, but on the other hand, the share of banks' advances to NBFCs has doubled from 4.5 per cent in February 2018 to over 9 per cent in July.
Meanwhile, corporate debt exposure to NBFCs rose 33.6 per cent year-on-year to Rs 76,000 crore in July but the share in total corporate debt to NBFCs marginally contracted to 4 per cent from 4.1 per cent in the year-ago period, the note said.
The outstanding investments in CPs of NBFCs crossed Rs 1 lakh crore-mark, rising by 87.1 per cent year-on-year to Rs 1.05 lakh crore in July.