Shares of Poonawalla Fincorp Ltd gained 3.51% to ₹285.90 on Tuesday after the Reserve Bank of India (RBI) announced a reduction in risk weights for bank financing to NBFCs and microfinance loans. The decision is expected to unlock more funds and boost credit availability, improving liquidity for the sector.
RBI’s Policy Shift and Its Implications
The RBI reversed its November 2023 notification, which had imposed an additional 25% risk weight on bank loans to NBFCs and microfinance institutions. However, the regulator has kept the risk-weight increase from 100% to 125% unchanged for personal loans and credit card outstandings by NBFCs.
Lower risk weights mean that banks need to hold less capital as a buffer, allowing them to increase their lending capacity. This is a significant development for NBFCs and microfinance institutions, which had faced a lending slowdown since the RBI tightened norms in November 2023.
Impact on NBFC Sector
Previously, the RBI had raised the risk weight on bank exposures to NBFCs by 25%, applicable to cases where the existing risk weight based on the external rating was below 100%. The latest move is expected to ease funding constraints, providing growth opportunities for NBFCs.
Stock Performance and Market Reaction
Shares of Poonawalla Fincorp rose to ₹285.90, up 3.51% from the previous close of ₹276.20. The stock traded in a day range of ₹277.20 – ₹286.90. The company’s market capitalization stands at ₹221.25 billion, with a P/E ratio of 132.06.
Analyst Outlook
Analysts believe that the RBI’s latest decision is sentimentally positive for the NBFC sector, as it restores the previous risk-weight framework, allowing financial institutions to expand their loan books and improve credit flow.
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