Indian non-bank lenders to tweak funding mix after RBI relaxes banks' lending norms
The RBI partially reversed tighter rules for bank loans to NBFCs, trimming risk weight requirements for banks on consumer microfinance loans by 25 percentage points to 100% and effectively reverting to the earlier risk weight requirements.
This will "free up capital for banks, allowing them to lend more to NBFCs," said George Alexander Muthoot, managing director, Muthoot Finance, adding that this will also make bank funding more attractive for NBFCs.
NBFCs had resorted to short-term commercial papers (CP) for their cash needs as funding from lenders tightened following the implementation of the previous rule, leading to their share of overall CP issuance jumping.
The lending firms' share of CPs has remained around 40% or higher in the last seven quarters, up from less than 30% in previous quarters, according to data from Crisil Intelligence.
Bhushan Kedar, director - fixed income research at Crisil Intelligence anticipates the trend changing.
"For NBFCs, the funding mix is expected to undergo change in the next year, and they would want to tap loans, especially with expected rate cuts, to widen their funding pool... The funding mix will change, and it could change more for some companies, depending on banks' preferences."
Indian lenders would begin by lending more to large and highly-rated names, before moving towards the lower-rated firms as the year progresses, a banker said requesting anonymity as he was not authorised to speak to media.
However, the shift in NBFCs' borrowing mix may not be immediate. "It may take some time before banks resume lending to NBFCs at previous levels. It could take six to nine months, depending on how RBI guides banks on NBFC lending," said Kishore Lodha, chief financial officer at UGRO Capital.
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
Reuters
2 hours ago
- Reuters
Trade deal developments to drive Indian rupee; bond yields to track Treasuries
MUMBAI, July 7 (Reuters) - Indian rupee traders will monitor trade talks with the U.S. this week, ahead of a July 9 deadline for making deals with the world's largest economy, while government bond yields will likely be range-bound with focus on movement in Treasury yields. The rupee closed at 85.3925 on Friday, with little change over the week. Traders reckon that a U.S.-India trade agreement would be a boost for the South Asian country, but it is unlikely to spark a sharp rally. "If the treaty happens, the rupee may see some more upside while the RBI (Reserve Bank of India) may not be very comfortable with a fast appreciation of the rupee," said Anil Bhansali, head of treasury at Finrex Treasury Advisor. He pegged the near-term resistance for the local currency at around 85. The rupee's very near-term implied volatility has remained muted despite the uncertainty, reflecting market expectations of a range-bound movement. The U.S. is close to clinching several trade deals ahead of the July 9 deadline, Treasury Secretary Scott Bessent said on Sunday. Meanwhile, data released on Friday showed that India's foreign exchange reserves rose to $702.8 billion, as of June 27, in touching distance of an all-time high hit last year. The dollar continues to trend downwards, with scaled-back wagers on rate cuts by the Fed prompting only fleeting gains last week. U.S. consumer inflation data due on Tuesday, followed by retail sales data on Thursday, will also be in focus to gauge the future path of benchmark policy rates. Meanwhile, India's 10-year benchmark 6.33% 2035 bond yield ended at 6.2947% on Friday, barely changed for the week. Traders expect it to move in a range of 6.28% to 6.33% this week. Bond market participants would remain focused on the movement in U.S. Treasury yields this week, especially after strong jobs data reduced hopes for Fed rate cuts. "Tariffs and other geopolitical uncertainties may contribute to market volatility in the short term, but taking into consideration the modest growth expectations, with the current trend of inflation, there may be scope for monetary easing," said Parijat Agrawal, head of fixed income at Union Asset Management. Traders will also watch whether the recent surge in foreign inflows into Indian bonds continues, with investors having net bought over $1 billion of government bonds last week. Also on the radar is the RBI's next move, after it did not raise the quantum of liquidity withdrawal from the banking system despite surplus hitting a three-year high on Friday. The central bank's gradual approach for variable rate reverse repos (VRRRs) is likely to keep the overnight interbank lending rates between the policy repo rate and the floor of the corridor, allowing some policy transmission, traders said. KEY EVENTS: ** U.S. initial weekly jobless claims for week to June 30 - July 10, Thursday (6:00 p.m. IST)
The Herald Scotland
3 days ago
- The Herald Scotland
New Scottish shopping centre owner puts 50 stores on market
It comes after the Yorkshire-based developer acquired the Regent Shopping Centre in South Lanarkshire. The agent said: 'Occupying a dominant position in Hamilton town centre, the centre's positioning and scale means that it makes up a significant proportion of the town centre core. 'The six-acre gateway site has been identified as key to South Lanarkshire Council's masterplan vision for the regeneration of Hamilton town centre to create a vibrant, accessible, and resilient town centre with a focus on living, leisure, healthcare and workspace as well as incorporating a significantly reduced retail element.' Tahir Ali, of Evergold, said: 'Our plans for the Centre are aligned closely with the council's aim to have a diverse and sustainable mixed use town centre that not only serves its immediate catchment but also becomes a vibrant hub for the wider region.' READ MORE: Scottish shopping centre sold ahead of major redevelopment In addition to acting as sole letting agent, Shepherd Chartered Surveyors will assume an asset management role together with a property management role. Calvin Molinari, of Shepherd Chartered Surveyors, said: 'This instruction follows our recent merger with Whyte & Barrie Chartered Surveyors to form a practice unrivalled in its delivery network of surveying services throughout Lanarkshire. 'Our extensive expertise and experience within the Lanarkshire market make us best placed to deliver effective asset management and property management roles alongside actively marketing the available retail units at this gateway site to a range of prospective tenants.' The 50 retail units, varying in size from 300 square feet to 50,000 square feet, are available on flexible lease terms. Scottish salmon exporters prepare major drive for Indian market Salmon farmers are preparing to tap into the Indian market in a move expected to deliver a massive boost for the Scottish economy. Producers are exploring new opportunities following agreement on a free trade deal that will slash tariffs on exports to the sub-continent. Scottish salmon currently faces a 33 per cent tariff which severely limits trade, but this is set to be removed next year when the deal struck by the UK Government takes effect. This paves the way for exports worth tens of millions of pounds every year, creating inward investment and well-paid jobs in Scotland. As talks get underway, Indian High Commissioner Vikram K. Doraiswami this week travelled to Scotland to learn more about the scale and quality of Scottish farm-raised salmon during a visit to Rosyth, Fife, which is home to the UK's largest processing plant. Around the Greens ⛳ Gourock golf pro reaps business benefits of championship win This article appears as part of Kristy Dorsey's Around the Greens series Derek Watters has been the head professional at Gourock Golf Club since 2007, having previously been at Largs for nine years.
The Herald Scotland
3 days ago
- The Herald Scotland
Scottish salmon exporters prepare major drive for Indian market
Scottish salmon currently faces a 33 per cent tariff which severely limits trade, but this is set to be removed next year when the deal struck by the UK Government takes effect. This paves the way for exports worth tens of millions of pounds every year, creating inward investment and well-paid jobs in Scotland. As talks get underway, Indian High Commissioner Vikram K. Doraiswami this week travelled to Scotland to learn more about the scale and quality of Scottish farm-raised salmon during a visit to Rosyth, Fife, which is home to the UK's largest processing plant. READ MORE: Edinburgh-based Vice Consul Amit Chaudhary also joined the tour of Mowi's plant on Thursday, discussing ways to strengthen trade ties as the sector prepares to expand in this fast-growing market. His Excellency Vikram K. Doraiswami, High Commissioner of India to the UK, said: 'This landmark agreement is set to boost bilateral trade, which has already crossed £40 billion, by reducing tariffs and streamlining market access. 'The Scottish salmon industry, a global leader exporting over £800 million in 2024, exemplifies the quality and innovation driving this partnership. 'I am delighted that with the FTA [free trade agreement] reducing trade barriers, India's restauranteurs and consumers will soon be able to affordably access premium Scottish salmon, enhancing consumer choice and fostering economic growth. 'This visit underscores the potential for deepened collaboration, as the FTA is expected to support creating jobs and opportunities in both nations.' (L-R) - Jamie McAldine, Mowi Scotland; Scott Nolan, Mowi Scotland; Ben Hadfield, Mowi Scotland; HE Vikram K. Doraiswami, High Commissioner of India; Vice Consul Amit Chaudhary; and James Park, Salmon Scotland, outside the Mowi plant (Image: Salmon Scotland) Ian Murray, Secretary of State for Scotland, added: 'The UK Government's Brand Scotland initiative is laser focussed on selling the very best of Scotland to the world. "Iconic and globally-renowned Scottish products like salmon — and our support for the sector — is an important part of that. 'The trade deal with India is central to our Plan for Change and great news for Scotland's food and drink sector: Slashing tariffs, increasing exports, growing our economy, securing jobs and putting more money in the pockets of hard working Scots. "I look forward to continuing to work with Scottish businesses and other key partners as we give our country the global platform it deserves.' India is the world's third-largest fish market, with domestic use reaching nearly 12 million tonnes in 2021 — up 120 per cent since 2005. Although most fish eaten is currently locally sourced, imports focus on premium seafood in major cities such as Delhi and Mumbai, where demand for healthy, high-quality produce is rising. Scottish salmon fits well into this high-end market. At present, India does not register on the list of nearly 50 countries where Scottish salmon is exported in significant quantity, but there has been a recent boom in the Asian market. Exports to China were up 60% last year and volumes to Taiwan more than doubled – contributing to record international sales of more than £840 million and confirming Scottish salmon's place as the UK's biggest food export. Ben Hadfield, Mowi's chief operating officer of farming in Scotland, Ireland, the Faroes and Canada East, said: 'Future successes in India will be a further boost for Mowi in Rosyth where we are proud to employ over 1,000 people from the local area. 'With the removal of tariffs in the new trade deal between India and the UK, there is huge potential for Mowi to create a market for Scottish salmon in India, as we have successfully done in other Asian markets.' Tavish Scott, chief executive of Salmon Scotland, added: 'India represents a huge untapped market for our nutritious fish as demand continues to grow across Asia. 'We're working closely with the UK Government and Indian partners to make sure Scottish salmon reaches more tables in India, supporting jobs and coastal communities here at home. 'This deal offers real potential, and we're determined to make the most of it for our farmers and the wider Scottish economy.'
