Synopsis
• The credit exposure of banks to Non-Banking Financial Companies (NBFCs) stood at Rs 14.2 lakh crore in June
2023, indicating a noteworthy 35.1% year-on-year growth. This expansion is indicative of the robust progress observed in NBFCs during the post-pandemic period. Notably, their decreased reliance on international borrowings is attributed to the prevailing elevated global interest rates and the tightening of global monetary policies. Furthermore, the proportion of NBFC exposure in relation to the overall credit aggregate has risen from 8.5% in June 2022 to 9.9% in June 2023. A significant development in the banking and NBFC sector is the merger between HDFC and HDFC Bank, which came into effect on July 01, 2023. This merger will lead to a reduction in exposure to NBFCs. HDFC’s bank borrowings will undergo reclassification, resulting in a shift of exposure to HDFC Bank. While this reclassification may entail a temporary downturn in NBFC exposure figures, it will simultaneously release limits, thus facilitating other NBFCs in obtaining funding from the banking system.
