Non-Banking Finance Companies (NBFC) are expected to incrementally borrow using the short-term commercial papers (CP) route in the near term to meet the overall funding costs, India Ratings said in a report on November 28.
The report further added that the agency expects NBFCs would be mindful of managing the gap in their asset-liability tenors.
"Also, diversified, large NBFCs could shift towards public debentures to enhance granularity in the overall funding mix, in view of the muted demand for long-duration bonds from mutual funds," the report added.
Overall, the regulatory measure would prompt NBFCs to borrow more from the capital markets, leading to a rise in rates, given the increased demand, it said.
The RBI raised the risk weight on consumer loans of banks and NBFCs by 25 percent on November 16 to curb the proliferation of unsecured consumer loans.
Earlier, banks attracted a risk weight of 125 percent and NBFCs 100 percent. After the tightening of the norms, the same will stand at 150 percent and 125 percent for banks and NBFCs.
Consumer loans include credit cards, and personal and retail loans. A jump in risk weight means lenders have to set aside higher capital against these loans.
CP issuances
The CP requirement of corporates has increased for the month of November, despite high rates in the money market, the report said.
Corporates have raised Rs 26,000 crore via CPs as of 23 November 2023, as compared to Rs 16,300 crore in October 2023, as per India Ratings report
The increase in corporates’ CP issuances was in line with the India Ratings expectations, and will continue amid the busy credit season, volatile commodity prices and elevated energy cost, the report stated.
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