Key Points
Non-banking finance companies have improved their asset-liability positions by trimming dependence on short-term borrowing and increasing preference for long-term funding sources, but in case of extreme liquidity conditions, 34 firms may face stress, the Reserve Bank of India said...
"The results (of stress scenarios) indicate that the number of NBFCs, which would face negative cumulative mismatch in liquidity over the next one year in the baseline, medium and high-risk scenarios, stood at 6, 17 and 34, respectively," the RBI said in its December 2023 Financial Stability Report...
Under the RBI's stress scenario, six NBFCs represent 1.3% of the asset size of the sample, 17 non-bank firms represent 10.4% and 34 firms account for 15%, respectively...
Based on five-year data, a study of the asset-liability management profile of the top 50 NBFCs showed that 76% of bonds issued by the non-bank lenders had a residual maturity of up to five years in September 2023, down from 88% in September 2018..
Highlighting the risks of interconnectedness between banks and NBFCs amid strong growth in retail loans, the RBI outlined the impact of its recent decision to increase risk weights on some categories of consumer loans by banks and non-bank lenders..
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