Bank credit to NBFCs grew by double digits in FY22, with outstanding bank credit increasing by 10.4% to Rs 10.5 lakh crore on improving overall economic activities and Banks’ renewed focus on NBFC sector following improving balance sheets, report says.
In absolute terms, according to an analysis by Care Ratings, bank credit to non-bank financial corporations (NBFCs) increased by Rs 99,000 crore in FY22, compared to FY21.
This figure does not include the liquidity banks have provided to them through securitization (Direct Assignment and Pass-Through Certificates) or banks’ investments in NBFC debt securities.
Meanwhile, mutual fund debt exposure through commercial paper (CP) and corporate bonds to NBFCs increased by 14.3% to Rs 1.7 crore over the course of the year. in FY22 as NBFCs issued more CP to fund IPOs and shifted from long to short term. investments in anticipation of rising interest rates.
In absolute terms, it rose by Rs 21,000 crore, the report said. NBFC’s outstanding CP investments increased by 25% to Rs 73,000 crore in FY22 as the year was the best ever for IPOs and NBFCs issued CP worth Rs 15,000 crore to fund IPOs.
The percentage share of funds deployed by mutual funds into NBFC CPs in FY22 was 4.4% of debt assets under management (AUM), compared to 3.6% in of exercise 21.
Banks’ credit exposure to NBFCs fluctuated around Rs 9 lakh crore-mark for most of FY22 and crossed the threshold of Rs 10 lakh crore in December 2021. And from there it has continued its upward trajectory and crossed Rs 10.5 lakh crore in March 2022 as capital market rates tightened and NBFCs turned to comparatively cheaper bank loans.