Mumbai, July 2 -- Bank credit growth to non-banking financial companies (NBFCs) continues to lose steam, even after the Reserve Bank of India (RBI) rolled back tighter risk-weight norms earlier this year to support the sector. Experts said NBFCs are increasingly turning to bond markets for cheaper and quicker funding, while stress in microfinance and unsecured business loans has made banks cautious.

Data from the RBI showed that in May 2025, bank credit to NBFCs fell by 0.3% year-on-year (y-o-y) to Rs.15.63 trillion. In May 2024, loans to the sector rose 16% y-o-y. If loans to housing finance companies and public financial institutions are excluded, growth in bank lending to NBFCs slowed to 3.6% in May from 7.2% in April.

Experts say th...