Rs 6,075 Crore, Added to Market Cap Today: RBI's Credit Policy Changes Fuel Over 5 Per Cent Rally in This NIFTY 50 Stock

The Reserve Bank of India (RBI) eases lending norms for NBFCs, reducing risk weights on bank loans from 125 to 100 per cent, fueling optimism and triggering a stock market surge.

Around 2.15 pm, the NIFTY 50 index remained flat at 22,542 on Thursday, but one stock stole the spotlight - Shriram Finance. The stock surged over 5.35 per cent to reach Rs 605, following a crucial policy announcement from the Reserve Bank of India (RBI). The central bank’s decision to lower the risk weight on bank loans to non-banking financial companies (NBFCs) from 125 per cent to 100 per cent was seen as a game-changer, triggering a rally in the sector.

The move, set to take effect from April 1, effectively reverses a tightening measure imposed in November 2023. At the time, RBI had increased capital requirements for banks lending to NBFCs, making borrowing costlier for these financial institutions. Now, with a lower risk weight, banks will need to set aside fewer funds as a safety buffer, unlocking greater lending potential and improving liquidity in the sector.

The market reacted positively to this shift in policy, with several NBFC and banking stocks trading in the green. The policy change is expected to release around Rs 40,000 crore of capital, which could translate into Rs 4 lakh crore of additional lending capacity. This reduction in risk weights will not only ease funding costs for NBFCs but also enhance their ability to expand business operations and extend credit more effectively.

Shriram Finance has been under pressure in recent months, witnessing a 20 per cent decline from its peak due to concerns over slowing commercial vehicle (CV) sales and rising asset quality risks. However, an uptick in freight rates since December has provided some support, improving sentiment around the stock. The RBI’s policy shift will further strengthen the company’s outlook, as increased lending capacity could drive growth in its core segments.

Despite recent volatility, Shriram Finance remains optimistic about its long-term prospects. The company has been focusing on the used passenger vehicle (PV) and non-auto segments, which continue to show resilience. Moreover, its asset quality has remained robust, with no significant deterioration in gross non-performing assets (GNPA).

In its financial results for the quarter ended December 2024, Shriram Finance reported a net profit of Rs 2,080 crore, reflecting a 14.4 per cent year-on-year growth, excluding a one-time gain from the previous quarter. The company’s net interest income (NII) increased by 14.3 per cent to Rs 5,823 crore during the same period, showcasing strong earnings momentum.

As a major player in the Indian financial services industry, Shriram Finance has built a strong legacy since its inception in 1979. The company specialises in asset financing and offers various credit solutions, including vehicle financing, personal loans, and small business loans. It has played a crucial role in financial inclusion by providing affordable finance options to First-Time Buyers and Small Road Transport Operators, particularly in the pre-owned commercial vehicle segment.

With a market capitalization exceeding Rs 1.13 lakh crore, Shriram Finance remains a dominant force in the NBFC space. The recent RBI policy move has injected fresh optimism into the stock, and investors are closely watching its trajectory as lending conditions improve.

Disclaimer: This article is for informational purposes only and should not be considered investment advice.