Non-banking finance companies' (NBFCs) reliance on bank borrowings is likely to rise in FY27 due to lower interest rates, a rating agency said on Wednesday.

The share of bank borrowings, which rose to 43 per cent on the back of higher activity in the second half of the recently concluded FY26, will inch up further to up to 45 per cent by the end of the ongoing fiscal, Crisil Ratings said.

It attributed the shift in preference to lower interest rates in the bank lending market, which is likely to lead to a tapering in the debt capital market issuances.

"While bank lending rates continued to decline throughout last fiscal, bond yields, after declining in the first half, inched up in the second half and remain elevated," the agency said.

Additionally, the share of external commercial borrowing (ECB) issuances will also be muted in the near term, owing to geopolitical uncertainties and the resultant exchange rate volatility, it added.

In such a scenario, securitisation is expected to provide some support to resource raising for NBFCs, the rating agency noted.

"With government security (G-sec) and corporate bond yields expected to remain elevated in the near term due to an uncertain macroeconomic environment, corporate bond interest rates are likely to continue to be higher than bank lending rates in the initial part of this fiscal at least," its director Malvika Bhotika said.

The agency said FY26 was a story of two divergent halves, which saw the reliance on capital market instruments rising initially and then shifting to bank loans primarily due to lower interest costs.

Between January and July 2025, while bond yields fell more than 0.80 per cent, the weighted average lending rate (WALR) of banks declined only 0.50 per cent. However, bond yields subsequently reversed trend, while the WALR decreased another 0.40 per cent between August 2025 and March 2026.

Bond issuances decreased from Rs 2.1 lakh crore in the first half of the last fiscal to Rs 1.4 lakh crore in the second half of FY26, while bank lending to NBFCs saw a sharp net increase to Rs 2.5 lakh crore (as of February-end 2026) in the second half against a net decrease of Rs 0.2 lakh crore in the first half.

Going forward, diversification of the resource mix remains crucial for NBFCs to ensure adequate funding availability at optimal cost to support their growth plans, the domestic rating agency said.

Published on April 15, 2026