Mumbai: Mutual funds, which continue to benefit from Indias increasing financialisation of savings, appear to have stepped in to fill the financing void created by circumspect banks that have slowed fund flows to non-bank lenders following regulatory scrutiny on such exposure.

Their support to non-banking financial companies (NBFCs) climbed 47% in October, albeit on a much smaller base. That compares with a growth of 6% in bank lending to NBFCs, although on a much larger base, but nevertheless reflecting the impact of regulatory caution on bank exposure to this segment. To be sure, banks remain the biggest financing source for NBFCs, but the share of alternative market-driven instruments in the total funding pie will increase.