Bank lending to non banking financing companies (NBFCs) slowed in November from a month earlier even as the easing in the year on year (y-o-y) growth continued. Data from the Reserve Bank of India (RBI) showed that the y-o-y growth in bank loans to NBFCs slowed to 21.5% in November from 22.2% a year ago.
To be sure, loans to NBFCs continue to be among the fastest growing segments with banks second only to the 30.1% growth reported by the individual loan segment. Bank credit exposure to NBFCs stood at Rs 14.9 lakh crore in November 2023, up 21.5% y-o-y and lower than the 30% average growth for the prior 12 months. However, the proportion of NBFC exposure in total bank credit has risen from 9.5% in November 2022 to 9.6% in November 2023, Care Ratings said in a report.
Analysts however do not expect a sharp slowdown in bank lending to NBFCs, despite the RBI increasing risk weights on such loans in November. The central bank increased the risk weight on consumer credit for banks and NBFCs to 125% from 100%.
“The RBI norms make lending by banks to NBFCs more expensive but such is the pace of growth from this segment that banks will continue to lend even at a higher capital cost or even a lower margin. Demand from NBFCs is also unlikely to ease because consumer demand remains strong,” said Ajit Kabi, analyst at LKP Securities.
The currently slowdown in the pace of lending to NBFCs is more statistical rather than due to the new RBI norms because the full impact is expected only in the December numbers. However, though there could be a moderation in growth, a sharp fall is unlikely, analysts said.
