Mutual funds provided 47% more funding to non-banking financial companies (NBFCs) in October 2024, reaching Rs 2.33 lakh crore. This figure has remained above Rs 2 lakh crore for the last six months. According to a report by CareAge Ratings, the percentage of this increase was 47.1% on an annual basis.

Contribution of Commercial Paper

The figure of debt issued through commercial paper and corporate debt has reached Rs 1.22 lakh crore. This figure has remained above Rs 1 lakh crore for the last one year. It has an important contribution to the funding of NBFCs.

Increased funding from banks

Funding given by banks to NBFCs in October 2024 stood at Rs 15.4 lakh crore, which is 6.4% more than last year. It has increased by 0.5% on a monthly basis. This increase in loans given by banks to NBFCs shows that the funding environment for NBFCs is stable and growing.

Increased share of NBFCs

The share of total loans given by banks to NBFCs stood at 8.9% in October 2024. It has almost doubled from 4.5%, which is much higher than the figures of February 2018. However, it has come down slightly compared to October last year (9.4%).

RBI's new guidelines

RBI had increased the risk weight on bank loans to NBFCs in November 2023. Despite this, the funding situation for NBFCs remained stable, and their debt stood at Rs 2.33 lakh crore. According to the report, NBFCs have started diversifying their liability profile, which is strengthening their financial position.

Decline in commercial paper

According to RBI data, the weighted average discount rate (WADR) of commercial paper stood at 7.44% till November 2024, which is lower than the same period last year (7.70%). This is because NBFCs have reduced the issuance of commercial papers due to concerns over the sustainability of their loan portfolio growth.

Thus, the increased funding received by NBFCs is a positive sign for them, raising hopes of financial stability and growth in the times to come.