NBFC Bank Borrowings Rise: What RBI's October Bulletin Says About Funding Risk
RBI's October Bulletin shows NBFC bank borrowings rising as loans grew 24%. Here is what it means for funding, gold loans and systemic risk.
Non-bank lenders are leaning more on banks for money, and the central bank has noticed. A staff report in RBI's October Bulletin, covered by Business Standard on 23 October 2026, found that NBFC bank borrowings rose moderately in 2025 while credit growth stayed strong. For credit-risk watchers, the finding about NBFC bank borrowings is a reminder that growth and interconnectedness often rise together.
What the bulletin found
The data points reported are as of end-December 2025. Bank borrowings and market instruments such as debentures and commercial paper together made up 77.2% of total NBFC borrowings. Deposits at deposit-taking NBFCs grew 14.9%. Loans and advances grew 24%, while investments slowed as NBFCs shifted their assets toward core lending. Business Standard credits the report to RBI staff, so the views are those of the authors and not an official RBI position.
Why reliance on banks rose
The report links the increase to two things: RBI restoring the risk weights on bank loans to NBFCs to their levels before November 2023, and softer bank lending rates. A risk weight is the factor a bank uses to decide how much capital it must hold against a loan. Higher risk weights make a loan costlier for the bank, so lending to NBFCs becomes less attractive. When the weights came back down, bank credit became easier to extend and cheaper to take.
What is driving credit growth
Secured loans make up roughly three-quarters of NBFC loans and advances and were the main growth engine, according to the report. Retail and industry led the expansion, and trade and commercial real estate within services grew at double-digit rates. Unsecured lending rose sharply at end-December 2025, though the report attributes part of this to a base effect, meaning growth looks large because the previous period was low.
Segment trends are telling. Gold loans accelerated and accounted for 10.5% of incremental NBFC credit between December 2024 and December 2025, helped by high gold prices. Vehicle loans, the largest retail segment, slowed. Microfinance and self-help-group lending declined, which the report ties to regulatory guardrails and a move toward secured products.
The interconnectedness question
Here is the risk, explained simply. Imagine a group of neighbours who all borrow from the same well. If the well runs low, everyone feels it at once. Banks fund NBFCs, NBFCs lend to households and firms, and a shock in one place can travel to the other. RBI said NBFC reliance on banks "may be monitored on an ongoing basis" because of possible systemic concerns. That is a monitoring signal, not a warning of imminent stress.
A separate Business Standard outlook piece on 9 October reflected analyst views that asset quality is the key monitorable for the second half of FY27, with credit costs expected to stabilise or fall, though risks include inflation, MSME stress and weak rural incomes. Those are analyst opinions, so read them as context rather than data.
What credit-risk teams can do
Lenders can watch the funding mix: how much sits with banks versus markets, and how quickly it reprices. Analysts can track gold-loan concentration, since a fall in gold prices would hit collateral values. Students of regulation should note how a single policy lever, the risk weight, feeds into funding costs and growth.
What to watch next
Look for follow-up from RBI in its financial stability work, bank disclosures on NBFC exposure, and Q2 results from large NBFCs. We have only seen the bulletin through press coverage here, so check the full report for exact tables.
Key takeaways
- RBI's October Bulletin staff report says NBFC bank borrowings rose moderately in 2025, as loans and advances grew 24% by end-December 2025.
- Secured loans (about three-quarters of the book) and gold loans (10.5% of incremental credit) drove growth, while microfinance shrank.
- RBI says the bank-NBFC link should be monitored because of interconnectedness; this is a watch item, not a stress signal.
Sources
- [Business Standard: NBFCs' reliance on bank borrowings rises amid strong credit growth, RBI](https://www.business-standard.com/amp/industry/banking/nbfcs-reliance-on-bank-borrowings-rises-amid-strong-credit-growth-rbi-1261023016111.html)
- [Business Standard: Asset quality remains key monitorable for NBFCs in H2FY27](https://www.business-standard.com/amp/finance/news/nbfc-outlook-higher-cost-of-funds-could-compress-spreads-and-lower-nims-1261009005261.html)
Tags: NBFC RBI Bulletin Credit Risk Gold Loans Funding