Even as NBFCs are trying to recover from the liquidity crunch mainly on account of default by IL&FS, a surge in bad debt amid higher lending rates may emerge as another challenge for them going ahead, a report by a global association said. Other than a fall in contribution of loans from March to September 2018, NBFCs also saw an increase in the lending rates in the same period, Institute of International Finance (IIF) said in the report. However, the funding situation of non-bank financiers is apparently stable with their non-performing loans at 6.1%, lesser than the commercial banks. While commercial banks tried to close the gap created by the NBFCs, there are some sectors which might experience stress as they were reliant on them, the report also noted. Also read: Share market LIVE updates: Sensex turns choppy, Nifty near 10,800; TCS, L&T among top losers Even as government policies have been supportive of NBFCs and their situation might appear contained, it will be difficult for them to increase lending, the report added. Meanwhile, close attention to India\u2019s financial circumstances is expected from the policy makers in 2019 as part of their efforts to boost credit growth and bolster the economy and ease access to credit ahead of general elections in three months from now, it said. \u201cEven though lower oil prices will reduce external vulnerability in 2019, we think India will remain in focus in the context of a currency that remains somewhat overvalued, changes at the helm of the RBI, upcoming general election (due by May), and restructuring of IL&FS \u2014 a large shadow bank in distress,\u201d it added.