New Delhi, Apr 15 (KNN) Non-banking financial companies (NBFCs) are expected to increase their reliance on bank borrowings in FY27, supported by relatively lower interest rates in the banking system, according to Crisil Ratings.
The share of bank borrowings, which rose to 43 per cent in FY26 amid higher activity in the second half, is projected to inch up further to around 45 per cent by the end of the current fiscal.
Capital Market Borrowings Lose Momentum
The rating agency attributed this shift to evolving interest rate trends. While bank lending rates continued to soften through FY26, bond yields declined initially but hardened in the latter half and remained elevated, PTI reported.
As a result, debt capital market issuances are expected to moderate, with corporate bond rates likely to stay higher than bank lending rates in the near term.
ECB Activity to Remain Subdued
External commercial borrowings (ECBs) are also expected to remain muted due to geopolitical uncertainties and exchange rate volatility, limiting another potential funding avenue for NBFCs.
In this backdrop, securitisation is likely to play a supporting role in resource mobilisation.
FY26 Marked by Divergent Trends
Crisil noted that FY26 saw a clear shift in borrowing patterns. In the first half, falling bond yields made capital market instruments more attractive. However, in the second half, rising bond yields and declining bank lending rates prompted NBFCs to turn towards bank funding.
Between January and July 2025, bond yields fell by over 0.80 percentage points, while banks’ weighted average lending rates (WALR) declined by about 0.50 percentage points. In contrast, from August 2025 to March 2026, bond yields reversed trend while WALR declined further by around 0.40 percentage points.
Bank Credit Growth Outpaces Bond Issuances
Reflecting this shift, bond issuances dropped from Rs 2.1 lakh crore in the first half of FY26 to Rs 1.4 lakh crore in the second half. Meanwhile, bank lending to NBFCs saw a sharp increase, with net inflows of about Rs 2.5 lakh crore in the latter half, compared to a net decline of Rs 0.2 lakh crore in the first half.
Need for Diversified Funding
Despite the current preference for bank borrowings, the agency emphasised the importance of maintaining a diversified funding mix. This will help NBFCs ensure stable access to funds at optimal costs and support their growth plans amid an uncertain macroeconomic environment.
(KNN Bureau)
