Non-bank financial companies (NBFC) are back in the markets raising funds at ultra-cheap rates as the banking system runs into a huge surplus, but banks are still reluctant to give loans.
What the banks and other investors are doing instead is investing in short-term commercial papers. Sensing an opportunity to raise cheap funds, companies in the NBFCs sector have moved in, raising three months money at even cheaper than the overnight repo rate of the Reserve Bank of India (RBI). The NBFC sector largely comprises financial institutions, housing finance companies (HFC), NBFCs, and microfinance institutions (MFI).
In August, the non-banking