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Non-banking finance companies are increasingly becoming independent of traditional banks for borrowing money due to the drop in wholesale lending rates.
According to latest data put out by the Reserve Bank of India, banks’ lending to NBFCs has declined 5 per cent year-on-year in April-August after rising 6 per cent in FY15. This comes on the back of a drop in wholesale lending rates, which has fallen around 100 basis points since January. These rates are directly linked to the policy rate set by the RBI, which has cut the repurchase rates by 125 basis points since January.
“Transmission of rate cuts to wholesale rates is very fast,” said Ajay Bodke, CEO and Chief Portfolio Manager at Prabhudas Lilladher.
Subdued growth Also, NBFCs have been witnessing subdued growth in business. “Credit growth has been slow. We expect the second half to be better with lot of infrastructure activity, but it will not be a significant improvement,” said Umesh Revankar, Managing Director at Shriram Transport Finance.
Shriram Transport Finance’s total assets under management grew 11.28 per cent and 11.31 per cent in FY15 and Q1 FY16, respectively. LIC Housing Finance’s loan book growth fell to 18 per cent year-on-year in Q1 FY16 from 21.6 per cent in FY15.
Kshama Fernandes, CEO of IFMR Capital, a Chennai-based NBFC, sees NBFCs continuing to access capital markets and further diversifying their sources of capital.
“We have raised ₹15,000 crore in the last five years for our 85 NBFC clients, out of which ₹7,500 crore has happened in the last one year alone. This has proved to be an efficient and reliable financing strategy for them,” she said.
Wholesale papers include instruments, such as commercial papers, certificates of deposits and corporate bonds/non-convertible debentures, among others. The major gainers of falling wholesale lending rates are select banks, housing finance companies and automotive finance companies.
Among the listed companies, major gainers are YES Bank, IndusInd Bank, Shriram Transport Finance, LIC Housing Finance, HDFC and Mahindra & Mahindra Finance, said Bodke.
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