Rating agencies flag tightening liquidity as a key monitorable for NBFC credit profiles

Rating analysts are increasingly flagging funding-side liquidity as a key monitorable for non-banking financial companies, as a widening bank credit-deposit gap pushes lenders toward costlier wholesale funding.

Mid-sized NBFCs with thinner on-balance-sheet liquidity and a higher reliance on market borrowings are most exposed to a repricing of their funding costs, which can compress net interest margins even before any asset-quality stress emerges.

Key monitorables

• Share of wholesale versus retail funding in the liability mix.
• Asset-liability maturity gaps in a rising-rate environment.
• Unencumbered liquid assets as a proportion of short-term liabilities.

A preparatory rating that stress-tests the funding profile can help NBFCs identify vulnerabilities before they reach the official rating process.