Mutual funds’ debt exposure in the form of commercial paper (CP) and corporate debt (CD) to non-banking financial companies (NBFCs) rose by 14.3 per cent year-on-year (YoY) to ₹1.7 lakh crore in March, according to a report by CARE Ratings.
The growth was on account of the issuance of CPs by NBFCs for funding investments in initial public offerings (IPOs) and shifting long-term to short-term investments as the market expected a hike in interest rates.
The percentage share of funds deployed by MFs in NBFCs’ CPs stood at 4.4 per cent of debt assets under management (AUMs) in March, compared with 3.6 per cent last year.
Meanwhile, investments in corporate debt of NBFCs rose by 7.4 per cent YoY to ₹97,000 crore in March. The percentage share also increased to 5.8 per cent in March from 5.6 per cent last year.
CPs deployed in NBFCs for less than 90 days and from 90 days to 182 days rose by 17 per cent and 31 per cent YoY to ₹45,000 and ₹11,000 crore, respectively, in March. However, CPs deployed for 182 days to one year fell 34% to ₹7,918 crore.
The proportion of CPs and corporate debt (182 days to 1 year) deployed together in NBFCs as a percentage of total debt funds increased to 17.2 per cent in March, as against 14 per cent last year, while the proportion of total debt funds increased to 10.3 per cent in March, compared with 9.2 per cent last year.
Further, bank credit to NBFCs grew in double digits in FY22, with outstanding bank credit to them rising by 10.4 per cent to ₹10.5 lakh crore on the back of improvement in overall economic activity and banks' renewed focus on the NBFC sector following improvement in their balance sheets, says the report.
In absolute terms, bank credit to non-banking financial companies (NBFCs) expanded by ₹99,000 crore in FY22, from FY21.
Banks' credit exposure to NBFCs fluctuated around the ₹9 lakh crore mark for the better part of FY22 and crossed the ₹10 lakh crore threshold in December 2021. And from there, it continued its upward trajectory and crossed ₹10.5 lakh crore in March 2022.
