Non-bank financial company stocks experienced significant rallies on Monday following the Reserve Bank of India's policy announcement on June 6. The central bank's decision to reduce risk weights on retail loans for well-capitalized NBFCs created positive sentiment across the financial services sector.
Leading the charge, Capri Global surged 15.2%, while Five Star Business Finance rose 9.2% and Edelweiss Financial Services climbed 8%. IIFL Finance gained 7.5%, with Bandhan Bank adding 7.1% and Geojit Financial Services advancing 6.9%.
JM Financial, Arman Financial Services, and Fedfina posted solid gains of 6.7%, 6.5%, and 5.9%, respectively. RBL Bank added 5.3%, while Fusion Microfinance and IREDA both rose 5.2% during the trading session.
Small finance banks also joined the rally, with ESAF Small Finance Bank gaining 5.8%, Utkarsh Small Finance Bank up 4.6%, and Jana Small Finance Bank rising 5.7%. Wealth managers like UTI AMC gained 4.3%.
The RBI reduced risk weights on retail loans for well-funded NBFCs, making it cheaper for these companies to lend money. This change signals strong support from the regulator for the non-banking financial sector.
The central bank relaxed rules for microfinance lenders and small finance banks. NBFC-MFIs can now put up to 40% of their money into loans other than microloans, giving them more options.
These changes will help reduce risks and make balance sheets stronger. Small finance banks will need less capital for microfinance loans, allowing them to lend more money to customers.
Umesh Revankar from Shriram Finance said the policy opens new growth opportunities, especially for NBFCs working in smaller towns. George Alexander Muthoot from Muthoot Finance called it a positive move that will lower borrowing costs and help provide affordable credit to underserved communities across India.
The policy changes are expected to boost credit growth and financial inclusion. The sector appears well-positioned for sustained growth in the coming quarters with regulatory support. Combined with a supportive economic environment, these measures will help NBFCs expand lending to rural and urban areas. This aligns with India's goal of reaching more underserved customers and supporting overall economic development.