Recently, the RBI increased the risk weight on bank loans to NBFCs. As a result, bankers became very reluctant to lend to NBFCs, especially those rated below the ‘A’ category. | Photo credits: iStock
NBFCs have long been asking for a special refinancing window from the Center, on the lines of the housing finance companies (HFCs), which have a special refinancing window from the National Housing Bank (NHB). In recent years, NBFCs have been facing a severe funding crisis following the failures of major NBFCs such as Infrastructure Leasing & Financial Services and Dewan Housing Finance Corp, among others.
More recently, the Reserve Bank of India (RBI) has increased the risk weight on bank loans to NBFCs due to the exuberance in such lending. This led to bankers becoming sharply cautious in lending to NBFCs, especially those rated below the ‘A’ category.
TDS, other requirements
NBFCs also reiterated their demand to reduce the threshold limit from ₹20 lakh to ₹1 lakh to enforce safety under SARFAESI as available to banks. NBFCs typically pass on lower loans than banks and have been seeking approval from the Center for several years now.
NBFCs are also seeking exemption from TDS on interest income under Section 194A, as available to banks and financial institutions. They have notified the NBFCs about deduction of taxable income under Section 80E on interest income from education loans.
Published on November 19, 2025
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