Banks will stay conservative in the short run while lending to non-banking finance companies (NBFCs) due to fears of performance in the sector, according to Pankaj Naik, Director of India Ratings and Research (Ind-Ra).
“They [banks] will take a cautionary stance because all is not well in the NBFC sector,” he said.
Mr. Naik noted that both secured and unsecured loans were showing signs of stress in NBFCs. Asset quality pressures will show up in FY26, he added. Mr. Naik further said a gradual increase in bank’s exposure to NBFCs would be concentrated on the ones with higher rating.
“They will focus on the top tier NBFCs, if at all they want to increase their exposure,” he added.
Pricing of loans to NBFCs, too, are not expected to come down immediately in the near term, said Mr. Naik. “Just because the risk rate is now becoming normal or low or back to their earlier level, doesn’t mean that banks will start increasing their exposure on the NBFC space,” he added.
Other researchers cited stress in the microfinance institutions (MFI) sector also to add to the risk aversion of banks. “Consumer incomes have moderated and delinquencies have risen in the MFI segment, which is likely to keep lenders more risk averse for the time being,” Nomura said in a research note.
Published – February 27, 2025 10:47 pm IST
