Fitch: RBI's Risk Weight Rollback May Not Provide Immediate Relief to NBFCs

Despite the Reserve Bank of India's recent decision to restore lower risk weights for bank loans to NBFCs and microfinance institutions, Fitch Ratings suggests the impact may be limited in the short term. The rating agency expects borrowing costs for Indian NBFCs to remain elevated throughout 2025, as projected policy rate cuts may not fully translate to lower bank lending rates. While the move aims to boost credit flow, Fitch anticipates that large financial leasing companies will continue to rely on diverse funding sources, including domestic capital markets and offshore options. The agency predicts that ongoing economic activity will provide lending opportunities for NBFCs, albeit with GDP growth moderating from the 8.2% high in FY24.

 

Sources: Business Standard, Financial Express, CreditSights