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Part - II

This has broad-based the NBFCs’ resources profile with the proportion of on-balance sheet funding (excluding securitization) raised by NBFCs from the market, in the form of non-convertible debentures and commercial paper, increasing from 39 per cent to 47 per cent (from FY1999- 00 to FY2002-03) (see Exhibit 1). Funding from banks and other sources has remained steady at around 45 per cent of total funds borrowed.

In terms of lending rates too, most banks now lend to highly rated NBFCs at market-related rates as compared to the premium that they charged historically. Earlier, bank funds were largely available at prime lending rate (PLR)-linked rates. The NBFCs’ dependence on relatively high-cost fixed deposits has also diminished with the proportion of such borrowings dropping from 16 per cent to 8 per cent (from FY1999-00 to FY2002-03).

Exhibit 1
Changing Resource Profile of NBFCs*

Securitization has also emerged as an important and attractive funding source for NBFCs, especially since it offers other benefits like superior credit rating levels, better exposure and asset liability maturity management opportunities and capital adequacy benefits. The NBFCs’ increasing affinity to securitization is exemplified by the sharp growth in CRISIL-rated securitization transactions by NBFCs from an insignificant Rs.2.09 billion in FY2000- 01 to Rs.20.50 billion in FY2002-03. This amounts to 9 per cent of the total borrowed funds of CRISIL-rated NBFCs as at March 31, 2003 as compared to 1 per cent as at March 31, 2001.

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* Securitization is considered as an off-balance sheet funding source. It is being indicated here as a proportion of on-balance sheet borrowing for FY2002-03 and FY2000-01 (instead of FY1999-00) to facilitate comparison

Source: CRISIL