 "NBFC")
The debt funding support that asset management companies (AMCs) provided to non-banking finance companies (NBFCs) rose by 60.1 per cent year-on-year basis to Rs 1.81 trillion in July 2023, according to Care Ratings.
The exposure through investment in commercial paper of NBFCs crossed the Rs one trillion mark, last seen in August 2019, it said.
Large NBFCs focused on the capital market, while mid-sized and smaller NBFCs continued their reliance on the banking system as their primary source of funding.
However, given the general credit risk aversion of mutual funds (MFs), the exposure to NBFCs, particularly those rated below the highest levels, is not expected to witness significant growth. Consequently, the dependence of NBFCs on the banking sector for funding is likely to remain high.
The credit exposure of banks to NBFCs stood at Rs 13.8 lakh crore in July 2023, indicating a 23.6 per cent year-on-year growth. This expansion is indicative of the robust progress observed in NBFCs during the post-pandemic period. Furthermore, the proportion of NBFC exposure in relation to the overall credit aggregate has risen from 9.0 per cent in June 2022 to 9.3 per cent in July 2023.
Notably, decreased international borrowings are attributed to the prevailing elevated global interest rates and the tightening of global monetary policies, the rating agency added.
