Credit rating agency, India Ratings and Research (Ind-Ra) in its latest ‘the November 2023 edition of Credit Market Tracker’ has said that the Reserve Bank of India’s (RBI) recent move to increase the risk weight on consumer credit of commercial banks and non-banking financial companies (NBFCs) would have a varying impact on their growth, capital buffers and margins.
According to the rating agency’s analysis, NBFCs will incrementally borrow more from short-term commercial papers (CPs) in the near term to meet overall funding costs. However, the agency expects NBFCs would be mindful of managing the gap in their asset-liability tenors.
Ind-Ra further noted that also, diversified, large NBFCs could shift towards public debentures to enhance granularity in the overall funding mix, in view of the muted demand for long-duration bonds from mutual funds. It said overall, the regulatory measure would prompt NBFCs to borrow more from the capital markets, leading to a rise in rates, given the increased demand.
