MUMBAI: Despite the Reserve Bank of India massively hiking the risk capital weighting on banks’ exposure to non-banks last November, the same has been rising unabated clipping at 26 per cent in May 2024, to go past Rs 15.6 trillion.
If they consider the exposure of the largest NBFC, HDFC was till its merger with HDFC Bank, the credit exposure of banks to NBFCs rose by 16 per cent on-year. Without considering the merged entity in the base data, the growth stood at 26 per cent and on a month-on-month basis, it rose by 0.9 per cent.
However, the proportion of NBFC exposure in relation to aggregate credit has come down from 9.6 per cent in May 2023 to 9.3 per cent in May 2024, according to an analysis of the data by rating agency Careedge.
Meanwhile, mutual funds debt exposure to NBFCs, including commercial papers and corporate bonds, remained above the Rs 2 trillion-mark for the second consecutive month at Rs 2.09 trillion in May. It marked a growth of 22 per cent on-year and 0.5 per cent sequentially, with CPs consistently remaining above the Rs 1 trillion mark for six consecutive months, standing at Rs 1.15 trillion, a level last seen in May 2019, in the peak of the NBFC crisis after IL&FS and DHFL went belly up in the previous year.
In May 2024, mutual funds debt exposure to NBFCs rose to 13.3 per cent of banks advances to NBFCs, which rose from 12.7 per cent in May 2023. However, it marginally declined from 13.4 per cent in April 2024.
If we compare to bank credit numbers to NBFCs before the crisis, to say from February 2018, absolute bank lending to NBFCs has jumped 4x, while MF exposure has come down by 9.5 per cent over six years.
Furthermore, MF exposure to NBFCs as a share of debt assets under management has come down from nearly 20 per cent in the latter part of 2018 to around 13 per cent by May 2024. On the other hand, the share of banks’ advances to NBFCs as a share of aggregate advances doubled from around 4.5 per cent in February 2018 to 9.3 per cent in May 2024.