Indian banks’ lending to NBFCs up 150% from pre-COVID levels

In November, banks' outstanding credit to NBFCs rose 33% from 2021.

Indian banks' outstanding credit extended to non-bank financial companies (NBFCs) have more than doubled compared to pre-COVID levels, according to a report by Care Edge Ratings.

Outstanding credit extended to NBFCs is 1.5 times higher in November 2022 compared to the level in February 2020, the credit rating agency said. 

In November 2022, banks’ outstanding credit to NBFCs rose by 33% year-on-year to $149.3b (INR12.2 lakh crore). The growth remained high due to high growth in the NBFC asset book and additional borrowings moved to banks due to differentials between market yields and interest rates offered by banks and lower borrowings in the overseas market, CareEdge Ratings reports.

Compared to February 2018 numbers, bank lending to NBFCs has tripled, whilst exposure to microfinance (MF) industry has reduced over the last four years. 

Banks’ MF corporate debt exposure has reduced by 36% as of November 2022 compared to February 2020, CareEdge Ratings reported.