Keep a close eye on credit quality, financials of NBFCs before investing

These instruments should not constitute more than 15-20% of your debt portfolio

With non-bank financial companies (NBFCs) finding it difficult to raise funds from banks, the total issuance of non-convertible debentures (NCDs) from them is expected to cross the previous high this financial year, according to ICRA Ratings. In 2013-14, they had raised a record Rs 423.83 billion. With many of the recent issuances offering returns of above 9 per cent, investors are likely to be attracted to them. However, they should do proper due diligence before investing in these instruments.

After returns, the next thing that investors should check is the issuer's credit quality. "I would not invest in a company