Mutual fund debt exposure to NBFCs, including Commercial Papers (CPs) and Corporate Debt, remained above the Rs 2 lakh crore mark for the second consecutive month touching Rs 2.09 lakh crore in May 2024.
This marks an increase of 22.0% y-o-y and 0.5% sequentially, with CPs consistently remaining above the one lakh crore mark for six consecutive months, standing at Rs 1.15 lakh crore (a level last witnessed in May 2019 i.e. nearly 5 years ago).
The credit exposure of banks to NBFCs stood at Rs 15.6 lakh crore in May 2024, indicating a 16.0% y-o-y growth. This growth is despite HDFC’s exposures being reclassified after its merger with HDFC Bank. Without
considering the merged entity in the base data, the growth stood at 26.0%. On a month-on-month (m-o-m) basis, the amount rose by 0.9%. However, the proportion of NBFC exposure in relation to aggregate credit
has reduced from 9.6% in May 2023 to 9.3% in May 2024.
In May 2024, mutual funds’ debt exposure to NBFCs increased to 13.3% of “Banks’ advances to NBFCs,” up from 12.7% in May 2023. However, it marginally decreased from 13.4% in April 2024.
Rising trend
The credit extended by banks to NBFCs has exhibited a consistent upward trend for close to six years and continued its acceleration along with the phased reopening of economies after the Covid-19 pandemic.
On a month-on-month (m-o-m) basis, the amount rose by 0.9%. Without considering the merged entity in the base data, the growth would have been higher at 26.0%. This adjustment provides a clearer picture of the
underlying growth trend. However, the proportion of NBFC exposure in relation to aggregate credit has reduced from 9.6% in May 2023 to 9.3% in May 2024. Additionally, the growth rate of advances to NBFCs has been below the overall bank credit growth since December 2023. This can be attributed to regulatory actions, base effect and capital market borrowing.
CP investments
CPs (less than 90 days) rose by 20.9% y-o-y to Rs.0.73 lakh crore in May 2024, CPs (90 days to 182 days) fell by 20.1% to Rs.0.07 lakh crore, and CPs (more than 6 months) increased by 53.8% to Rs.0.33 lakh crore in the reporting period. This increase comes against the backdrop of RBI increasing the risk weights on higher-rated NBFCs for borrowings from the banking system.
