RBI rate cuts, leading to cheaper borrowing costs, are beneficial for NBFCs that borrow at floating rates and lend at fixed rates, as it can increase their Net Interest Margins (NIMs).
"Whenever there is a rate cut, there will be money available at cheaper prices. Now let's understand a typical point about the NBFC sector. Typically. I am saying typically. Ok. NBFC Buy. Or I must say borrow is the right word. NBFCs borrow typically at floating rates and they pass on or lend money at fixed rates. So, I will give you a simple example. Let's take an example of Bajaj Finance, okay, Bajaj Finance assumes borrowed money at a floating rate. So, when there is a rate cut, their borrowing cost will go down. If boring cost cost goes down for them. Is it going to be a good point for them? Absolutely yes. But whenever they are lending money, they have already entered into agreements that they will lend money at fixed rates. So if that be so, can I say their nims nims are net interest margins. Can they go up? The answer is yes."
