Emkay Global’s Note on RBI Policy and NBFCs Outlook

Emkay Global expects NBFCs to outperform banks in the current policy environment, citing several performance metrics that highlight their stronger positioning. The brokerage notes that NBFCs like

and are growing faster than traditional banks, with AB Capital potentially doubling in value within 18–24 months due to strong fundamentals and market positioning. The recent RBI rate cut is seen as a catch-up after an unusually tight monetary stance, aimed at boosting growth while maintaining inflation control. While banks may see a 15–20 bps impact on NIMs , some will benefit from high-yield products such as credit cards and personal loans, where margins remain resilient. In contrast, NBFCs are expected to benefit from higher loan growth rates , better asset quality, and more flexible pricing power. With interest cost compression and improved credit cycles, NBFCs could deliver double-digit net interest margins (NIMs) and strong ROEs , especially those with diversified funding sources and lower deposit costs compared to banks. Emkay also highlights the RBI’s shift back to a neutral stance , signaling data-dependent, gradual rate cuts ahead. With inflation under control and economic growth stabilizing, it expects a long-term bond bull market , which benefits NBFCs reliant on debt financing for lending. The firm praises the RBI for moving away from outdated policies like high CRR requirements and using OMO more effectively for liquidity management. It estimates the opportunity cost of idle CRR reserves at ₹80,000 crore annually , emphasizing the need for structural reform. Finally, Emkay calls for reforms in corporate lending—specifically allowing loans against shares and land—to support sectors like real estate and new-age companies with intangible assets. These changes could unlock significant growth potential and reduce systemic risk over time.