More Stories

Informist, Tuesday, Sep 3, 2024

MUMBAI – The credit exposure of banks to non-banking finance companies was down 1.7% month-on-month in July, CareEdge said in a report today. However, on a year-on-year basis, the exposure was up 12.7% at 15.3 trln rupees.

According to data released by the Reserve Bank of India last week, banks' total outstanding non-food credit stood at 167.87 trln rupees as on Jul 26, down more than 600 bln rupees – or 0.4% – over the month. On a year-on-year basis, banks' non-food credit growth at the end of July was 15.1% after excluding the impact of HDFC Bank's merger with Housing Development Finance Corp, which occurred in July 2023.

"Advances to non-banking finance companies have experienced a slowdown in growth at 0.5% in July from December 2023," CareEdge said in a report.

In November, the RBI announced measures to clamp down on rapid credit growth in certain segments of the Indian banking system. These measures included an increase in the risk weight on credit exposure of banks to non-bank lenders, except housing finance companies and those that qualify for priority loans, by 25 percentage points. The move came amid the increasing dependency of non-banking finance companies on bank loans, the RBI had said then.

"...the growth rate of advances to non-banking finance companies has been below the overall bank credit growth since December 2023. This can be attributed to regulatory actions (risk weights), base effect, and capital market borrowings," CareEdge added. This is also illustrated by the fact that the share of bank credit to non-banking financial companies in total credit has declined to 9.1% in July from 9.3% a year ago.

CareEdge also said that mutual funds' exposure to non-banks in July was 2.64 trln rupees, which is near levels seen six years ago. Within the total exposure, the debt exposure of mutual funds to non-banking financial companies stood at 2.33 trln rupees, up 28.8% on year and 5.6% on a sequential basis. This marks the fourth consecutive month in which the number has been above 2 trln rupees.

Following the RBI's decision to raise risk weights on non-banking finance companies' borrowings from banks, investments in their commercial paper and corporate debt have surged as they moved to other avenues to fund their lending activity. The share of corporate debt rose to 4.7% in July from 4.0% a year ago, while investments in CPs were up 25% over the same period.  End

Reported by Christina Titus 

Edited by Deepshikha Bhardwaj

For users of real-time market data terminals, Informist news is available exclusively on the NSE Cogencis WorkStation.

Cogencis news is now Informist news. This follows the acquisition of Cogencis Information Services Ltd by NSE Data & Analytics Ltd, a 100% subsidiary of the National Stock Exchange of India Ltd. As a part of the transaction, the news department of Cogencis has been sold to Informist Media Pvt Ltd.

Informist Media Tel +91 (22) 6985-4000

Send comments to feedback@informistmedia.com

© Informist Media Pvt. Ltd. 2024. All rights reserved.