Nomura views the RBI’s decision to reverse the 25 percentage point increase in risk weights for bank lending to A-rated and above NBFCs as a positive development. Effective from April 1, 2025, this move is expected to improve credit flow from banks to NBFCs, especially in the MFI (Microfinance Institution) segment, by reducing risk weights on banks’ MFI exposure to 100%.
However, the increase in risk weights on personal loans and credit cards has not been reversed, maintaining a cautious outlook on unsecured lending.
Nomura anticipates that these changes will be immediately beneficial for the capital ratios of covered banks with higher MFI exposure, such as Bandhan Bank, AU Small Finance Bank, and IndusInd Bank (IIB). The brokerage maintains a positive stance on the NBFC/MFI sector, seeing improved capital adequacy ratios and enhanced liquidity as key growth drivers in the upcoming quarters.
