NBFCs in limelight
RBI bowed down to a long term ask of the NBFCs – it slashed the risk weights of the bank loans to NBFCs, depending on the ratings. This is good for the NBFCs as it will increase credit inflow and will also encourage banks to lend more to NBFCs, thereby boosting credit growth in the economy. The move is seen as a positive step towards revitalising the NBFC sector and promoting financial stability.
Risk-weighted assets are the loans and other assets of a bank, weighted to reflect their respective level of risk of loss to the bank. A lower risk weight on loans means that banks will now keep less capital against those loans, resulting in lower interest rates for borrowers as banks try to maintain their profit margins, making it less expensive for individuals, businesses or NBFCs to take out such loans.
RBI lowered risk weights on bank loans to NBFCs from 125% to 100%, effective April 1st, 2025.
Following this news, NBFCs are in the green today lead by the likes of Bandhan Bank, CreditAccess Grameen, AU Small Finance Bank and Cholamandalam Investment.