Following the Reserve Bank’s November 2023 directive, banks reduced their exposure to non-bank lenders, leading to a significant drop in credit growth to shadow banks, down to 15.3%. Meanwhile, non-bank financial companies (NBFCs) increasingly relied on mutual funds for debt, with a notable rise to 14.76% annually by March 2024. Despite this shift, banks’ credit exposure to NBFCs increased to ₹15.5 lakh crore, albeit at a slower growth rate compared to previous years. Mutual funds’ debt exposure to NBFCs surged to ₹1.90 lakh crore, while lower-rated NBFCs leaned towards bank funds.
Banking Sector’s Shift: NBFC Exposure Declines as Mutual Fund Debt Rises
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