India Credit Update: RBI proposal offers mildly credit positive funding flexibility for NBFCs

Research evidence excerpt

India Credit Update: RBI proposal offers mildly credit positive funding flexibility for NBFCs

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India Credit Update

RBI proposal offers mildly credit positive

funding flexibility for NBFCs

Industry Overview

Eligible NBFCs to gain direct access to term money 13 July 2026

The Reserve Bank of India (RBI) has proposed broader participation in the term money Global Emerging Markets | Corporate

market by allowing NBFCs (Non-Banking Financial Company, excluding Base Layer Credit

NBFCs), amongst others, to borrow and lend in the unsecured term money market (15 India

days to 1 year). The proposal marks an expansion of funding options for non-bank Rachna Jain, CFA

lenders, which until now have largely relied on bank borrowings, capital markets, Research Analyst

securitization and commercial papers for short-term funding. Merrill+65 6678Lynch2972(Singapore)

rachna.jain2@bofa.com

Modest credit positive from improved funding flexibility Jing Peng

From a credit perspective, the proposal is modestly positive. Eligible NBFCs would gain ResearchMerrill LynchAnalyst(Hong Kong)

access to unsecured institutional liquidity without the issuance process associated with jing.peng2@bofa.com

commercial paper or bonds. While most larger lenders already enjoy diversified funding Asia Pacific Credit Rsch Grp

Merrill Lynch (Singapore)

access, the new channel could improve liability management flexibility, particularly

during periods of market volatility. The ability to manage short-term asset-liability GEMSBofAS Corporate Strategy

mismatches through term-money transactions should marginally strengthen liquidity. See Team Page for List of Analysts

Wholesale-funded NBFCs are likely to benefit the most