Deposit Constraints Shadow Banks In March Quarter Even As Growth Stays Robust

NBFCs continued to expand their lending portfolios in the March quarter, driven by demand in retail and small business segments. However, challenges in deposit collection highlight structural issues in funding, prompting regulators to monitor liquidity risks closely.  

Loan Growth Momentum  

NBFCs recorded double-digit loan growth, particularly in consumer finance, housing, and vehicle loans. Strong credit demand and economic recovery supported expansion, positioning shadow banks as key players in India’s financial ecosystem.  

Deposit Mobilization Challenges  

Despite growth, deposit inflows slowed as commercial banks offered higher interest rates to attract savers. Regulatory scrutiny on deposit schemes has further restricted NBFCs, forcing reliance on wholesale funding and market borrowings.  

Liquidity And Risk Outlook  

Analysts warn that constrained deposits could pressure liquidity buffers if credit growth outpaces funding. NBFCs are expected to diversify funding sources, including securitization and bond issuance, to maintain stability.  

Key Highlights  

• NBFCs report strong loan growth in March quarter  
• Deposit inflows remain weak amid competition from banks  
• Regulatory oversight tightens on deposit schemes  
• Reliance grows on wholesale funding and securitization  
• Liquidity risks monitored by regulators and investors  

Sources: Economic Times, Business Standard, Mint, Financial Express