MFs Debt Exposure To NBFCs Surges 47% To Rs 2.33l Cr In Oct

On a m-o-m basis, the amount rose by 0.5%. The MFs debt exposure to remained at the same level sequentially at 15.2% of Banks’ advances to NBFCs, up from 11.0% in 2023

New Delhi: The mutual fund (MF) debt exposure to non-banking financial companies (NBFCs), which includes commercial papers (CPs) and corporate debt, has remained above the Rs 2 lakh crore level for more than half a year, reaching Rs 2.33 lakh crore in October.A CareEdge Ratings report said this marks an increase of 47.1 per cent (year-on-year), along with a marginal sequential rise of 0.3 per cent. Moreover, CPs have remained above the one lakh crore mark for almost a year, currently amounting to Rs 1.22 lakh crore.The credit exposure of banks to NBFCs stood at Rs 15.4 lakh crore in October 2024, indicating a 6.4 per cent growth. On a month-on-month basis, the amount rose by 0.5 per cent.

In October, mutual funds’ debt exposure to NBFCs remained at the same level sequentially at 15.2 per cent of ‘Banks’ advances to NBFCs,’ up from 11.0 per cent in October 2023.Compared to February 2018, absolute bank lending to NBFCs has surged to around 3.9x its previous level. Meanwhile, MF exposure turned positive, growing by 0.9 per cent over six years.

On the other hand, the share of banks’ advances to NBFCs as a share of aggregate advances, has nearly doubled from around 4.5 per cent in February 2018 to 8.9 per cent in October 2024, similar to the level witnessed in September 2024.However, this exposure has reduced from the 9.4 per cent level of October 2023, said the report.

Following RBI’s hike in risk weights on bank loans to NBFCs in November 2023, the share of exposure by banks to NBFCs as of October has remained the same sequentially while MF exposure to NBFCs debt instruments has remained above the Rs 2 lakh crore mark at Rs 2.33 lakh crore in October 2024. This has come as NBFCs have started to diversify their liability profile, said the report by CareEdge Ratings.However, as per RBI data, the weighted average discount rate (WADR) of CPs stood at 7.44 per cent in November 2024 (up to November 12), lower than 7.70 per cent during the corresponding period of the previous year as NBFCs reduced issuances due to concerns on the sustainability of high growth in their loan portfolio.