New Delhi, Aug. 26 -- Following the hawkish tone in the recent MPC minutes that raised the possibility of a 50-basis-point rate hike, non-banking financial companies (NBFCs) could face a 5-15 basis point increase in funding costs, potentially putting pressure on margins, said Kotak Institutional Equities, adding that asset quality will remain a crucial factor.

According to Kotak, NBFCs are expected to have a strong year despite the potential rise in funding costs. Growth is likely to be supported by healthy loan growth and asset quality in the first quarter, with most players expected to continue reporting strong growth in assets under management (AUM).

However, the brokerage said asset yields will remain a key factor for NBFC margins, ...