“Lending to non-bank finance companies (NBFCs) may turn skewed for banks in FY23, as rates tighten in capital markets,” the agency said in a report on Wednesday.
Changes in the funding mix of NBFCs in FY23 will be driven by increase in proportion short term funding It is being replaced to some extent by bank funding through commercial papers and debenture funding.
The report said that larger borrowings by large NBFCs will further increase the exposure of banks to this sector, and smaller NBFCs may face congestion.
With the increase in interest rates, after a 90 basis points (bps) increase in the repo rate, the agency said reserve Bank of India In phase two, NBFCs will see a faster rise in incremental financing cost than banks due to their institutional funding.
About one-third of NBFC borrowings will come for refinancing in FY23, it noted.
In addition, on-bank financing NBFC The balance sheet is mostly floating in nature and will also see an upward revaluation.
However, the agency said that the marginal cost of funds based lending rate (MCLR) – Linked funding will see cost reduction as compared to borrowing linked to market benchmarks like repos and T-bills.
The hike in rates could lead to a 90-100 bps year-on-year increase in funding costs in FY23, the report said. There could be some impact of the growth in select segments.
The agency said the current uncertain operating environment has prompted NBFCs to maintain additional liquidity in the range of 5-10 per cent of assets on the balance sheet, impacting profitability due to negative carry of excess liquidity.
However, NBFCs will reduce the liquidity buffer to some extent to mitigate the impact of negative carry with improvement in operating environment and increase in funding cost, the agency said.