NBFC Stocks Rally: Bajaj Finance, Cholamandalam, L&T Finance Gain as RBI Eases Rules

Sandip Raj Gupta

27/Feb/2025

Key Takeaways:

RBI reduced risk weight on bank loans to NBFCs from 125% to 100%, easing capital requirements.
Bajaj Finance, Shriram Finance, Cholamandalam, L&T Finance, and other NBFC stocks surged up to 6.5%.
Move expected to release ₹40,000 crore in capital, enabling ₹4 lakh crore in additional lending.

NBFC Stocks Surge as RBI Lowers Risk Weight on Bank Lending

RBI’s Decision Sparks Rally in NBFC Stocks

Shares of non-banking financial companies (NBFCs) surged on February 27 after the Reserve Bank of India (RBI) announced a relaxation in risk weight rules on bank lending to the sector. The central bank lowered the risk weight on bank loans to NBFCs from 125% to 100%, reversing the tightening measures imposed in November 2023.

The decision, which takes effect from April 1, 2025, is expected to boost liquidity in the sector and ease funding costs for NBFCs. The move came after markets remained closed on February 26 due to Mahashivaratri, leading to a sharp rally when trading resumed.

NBFC Stocks React Positively

The policy change triggered strong buying interest, with major NBFC stocks posting significant gains:

Stock	Intraday High	% Change
Cholamandalam Investment	₹1,439.95	5.27%
L&T Finance	₹142.18	6.51%
Bajaj Finance	₹8,739	3%
Shriram Finance	₹600.15	4.50%
Mahindra & Mahindra Financial	₹280.70	3.58%
Aditya Birla Capital	₹172.30	3%
Poonawalla Fincorp	₹362.90	4%

Why Is This Move Important?

More Lending Capacity:
- The reduction in risk weights frees up nearly ₹40,000 crore in bank capital, which can enable ₹4 lakh crore in additional lending.
Lower Cost of Funds:
- Banks now require less capital to lend to NBFCs, potentially reducing interest rates on loans.
Business Expansion:
- NBFCs rely heavily on bank funding, and this move will support credit flow, allowing them to expand their lending portfolios.

Expert View on RBI’s Move

SS Mundra, Former RBI Deputy Governor, stated:

"RBI is surely looking to boost growth. Around ₹40,000 crore of capital would be released, which can translate to ₹4 lakh crore of lending."

Market Outlook for NBFCs

Easier access to funds will likely enhance profitability for NBFCs.
Consumer lending and vehicle financing segments are expected to see strong growth.
Investors remain optimistic about the long-term impact of the RBI’s decision.

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