The Reserve Bank of India has proposed draft regulations that could significantly alter lending practices for non-banking financial companies, causing sector jitters despite robust corporate earnings.
Indian equities slipped on Friday after the Reserve Bank of India floated draft rules that could sharply curb revolving credit lines for non-banking finance companies, a move that hit lenders even as company earnings from a handful of blue chips helped steady the wider market. Bajaj Finance led declines in the Nifty 50, while the broader mood remained anchored by profit updates from State Bank of India, Motherson Sumi and Hindalco, according to The Hindu BusinessLine.
The central bank’s proposal would push most NBFC lending towards term loans and away from flexi-loan and overdraft-style products, a shift that could reshape business models across consumer-focused non-bank lenders. Bajaj Finance fell nearly 6% and Bajaj Finserv dropped 3.7% as investors digested the consultation paper. Hariselvan Radhakrishnan of HST Wealth told The Hindu BusinessLine that the market was reacting to the possibility of a structural change in lending practices rather than a fresh reassessment of asset quality.
The regulator has invited comments until August 28, leaving scope for the draft to be amended before any final framework is issued. That matters because the RBI has been steadily tightening oversight of large and systemically important non-bank lenders. In recent months, it withdrew concentration-risk exemptions for government-owned NBFCs and finalised a framework that uses an asset-size threshold of ₹1 lakh crore to identify upper-layer NBFCs, according to Business Standard and Moneycontrol. Separately, the RBI has also eased some risk-weight norms for infrastructure-focused NBFC lending, showing it is still willing to calibrate rules by segment.
The day’s losses were partially offset by stronger earnings-driven buying in other parts of the market. State Bank of India rose almost 4% after posting a 10% jump in quarterly net profit and reporting its best asset-quality reading in years, with gross non-performing assets falling to 1.47%. Motherson Sumi gained 8.7% after doubling profit and setting a record revenue figure, while Hindalco climbed 3% on a 32% rise in quarterly revenue, The Hindu BusinessLine reported.
Benchmark indices still finished lower on the day, with the Nifty 50 ending at 24,570 and the Sensex closing at 78,499, but both remained higher for the week. Market participants will now turn to inflation data, a busy primary market and the RBI’s next move on NBFC rules for direction. LiveMint reported that the RBI kept the repo rate unchanged at 5.5% earlier this week, adding another layer of caution for rate-sensitive sectors.
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