Why are NBFCs struggling to get funding?

Mid-sized and emerging NBFCs face challenges securing stable, low-cost funding as bank lending has plateaued despite regulatory changes.

What is the NBFC AUM growth forecast?

NBFCs' assets under management are expected to grow 18-19% annually, surpassing Rs 50 trillion by March 2027.

Which NBFC asset classes are showing stress?

Rising stress is observed in early delinquency buckets for vehicle finance, unsecured MSME loans, and loan against property.

Home / Business and Economy / NBFC Funding Squeeze: Growth Outlook Uncertain

NBFC Funding Squeeze: Growth Outlook Uncertain

24 Nov

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Summary

NBFCs face a tough funding environment despite strong balance sheets.
Mid-sized and emerging NBFCs struggle to secure stable, low-cost funds.
Vehicle finance and home loans show steady growth, but risks emerge.

NBFC Funding Squeeze: Growth Outlook Uncertain

Non-banking financial companies (NBFCs) are navigating a constricted funding environment, even with healthy balance sheets and a positive outlook for credit demand. While larger entities successfully tap into bond markets, mid-sized and newer NBFCs are confronting significant hurdles in obtaining consistent, affordable financing. This situation contrasts with the anticipation of substantial asset under management (AUM) growth, projected to exceed Rs 50 trillion by March 2027.

Despite regulatory adjustments aimed at easing bank lending, advances to NBFCs have plateaued, indicating a cautious approach by banks. Stronger NBFCs have diversified by issuing bonds, but those with fewer alternatives are more vulnerable. Consequently, strategies like securitization, loan sales, and a concerted effort toward funding diversification have become critical. External commercial borrowings are also gaining importance, particularly for housing finance companies seeking to leverage the bond markets.