Mutual Fund Debt Exposure To NBFCs Reaches Rs 2.32 Lakh Cr In Sep: Report

Remaining above the Rs 2 lakh crore mark for the sixth consecutive month, Mutual Fund (MF) debt exposure to non-banking financial companies (NBFCs), which includes Commercial Papers (CPs) and Corporate Debt reached Rs 2.32 lakh crore in September 2024, according to a report by CareEdge Ratings. This marks a year-on-year (YoY) increase of 31.2 per cent, although there was a sequential dip of 0.7 per cent.

The report highlighted that CPs have consistently stayed above the one lakh crore mark for 10 consecutive months, standing at Rs 1.22 lakh crore. The credit exposure of banks to NBFCs stood at Rs 15.3 lakh crore in September 2024, indicating a 9.5 per cent YoY growth. The amount rose by 0.4 per cent on a month-on-month (MoM) basis.

However, the proportion of NBFC exposure relative to aggregate credit decreased from 9.4 per cent in September 2023 to 8.9 per cent in September 2024, as per the report. In September 2024, mutual funds' debt exposure to NBFCs accounted for 15.2 per cent of "banks' advances to NBFCs," up from 12.5 per cent in September 2023 and slightly down from 15.4 per cent in August 2024.

“Following RBI’s hike in risk weights on bank loans to NBFCs in November 2023, exposure by banks to NBFCs as of September 2024 has touched the level last seen in September 2022 while MF exposure to NBFCs debt instruments has remained above the Rs 2 lakh crore mark at Rs 2.32 lakh crore in September 2024. This has come as NBFCs have started to diversify their liability profile,” as stated in the report.

The report added that the credit extended by banks to NBFCs, which had shown a consistent upward trend for close to six years and picked up pace alongside the phased reopening of economies after the Covid-19 pandemic has been reversed. Advances to NBFCs have experienced a slowdown in growth at 0.5 per cent in September 2024, compared to December 2023.