Advertisement
In this episode of Prop Personalities, we sit down with Hars...
Luxury real estate is one of the most talked-about segments ...
Welcome to Prop Personalities by Prop News Time - a podcast ...
Airports play a much bigger role than just enabling travel -...
Why does the same hotel brand operate multiple properties in...
Non-banking finance companies are expected to increase their reliance on bank borrowings in FY27 as lower interest rates make bank loans more attractive compared to other funding sources, according to a rating agency update issued earlier this week. The share of bank borrowings, which had already risen to 43% in FY26, is projected to move closer to 45% in the current fiscal. The shift is being driven by softer bank lending rates, elevated bond yields, and muted external commercial borrowing activity amid global uncertainties and exchange rate volatility.
Non-banking finance companies are projected to further strengthen their dependence on bank borrowings in FY27 as the lending environment continues to favour bank credit over other funding channels. The share of bank borrowings in NBFC funding, which increased to 43% during FY26 due to stronger activity in the second half of the year, is expected to rise further to around 45% by the end of the ongoing fiscal. Advertisement
The shift in funding preference has been linked to comparatively lower interest rates in the banking system. As bank lending rates continued to ease through the previous fiscal cycle, borrowing from banks became more cost-effective for NBFCs, leading to a gradual shift away from debt capital market instruments.
The rating agency noted that while bond yields declined during the first half of FY26, they moved upward in the second half and continue to remain at elevated levels. It also indicated that external commercial borrowings are likely to remain subdued in the near term due to geopolitical uncertainties and resulting volatility in exchange rates, which is impacting overseas fundraising appetite.
A senior rating official, Malvika Bhotika, stated that yields on government securities and corporate bonds are expected to remain high in the near term due to an uncertain macroeconomic environment. She added that corporate bond interest rates may stay above bank lending rates during the early part of the current fiscal, further supporting the shift towards bank credit.
The agency also observed that FY26 reflected two distinct phases in funding behaviour. In the first half, NBFCs increased their reliance on capital market instruments, supported by easing bond yields. However, in the second half, the trend reversed as lower bank lending costs led to higher bank-based funding. Between January and July 2025, bond yields declined by more than 0.80%, while the weighted average lending rate of banks fell by about 0.50%. This was followed by a reversal in bond yields, while bank lending rates saw a further decline of around 0.40% between August 2025 and March 2026.
On the volume side, bond issuances dropped from INR 2.1 lakh crore in the first half of FY26 to INR 1.4 lakh crore in the second half. In contrast, bank lending to NBFCs increased sharply, registering a net rise of INR 2.5 lakh crore as of February-end 2026 in the second half, compared to a net reduction of INR 0.2 lakh crore in the first half.
The agency also highlighted that while securitisation is likely to offer partial support to resource mobilisation, diversification of funding sources remains important for NBFCs to maintain stable liquidity and support their growth plans.
Source PTI
5th Jun, 2025
25th May, 2023
11th May, 2023
27th Apr, 2023
Advertisement
Facebook
Whatsapp
