The profitability of the NBFC sector, or the shadow banking sector, has grown 29.2% in FY18, following a steady decline in profit growth in the last three years amid liquidity constraints. The sector\u2019s profitability grew at a pace of 1.9% in FY17. The moderation in profit growth in FY17 can be attributed to increased provisioning norms for the NBFC sector as well as increased public funding raised by the sector companies. The significant jump in credit of 19.6% and moderation in provisioning in FY18 have led to a growth in PAT in FY18. \u201cDemonetisation is also another factor which led to moderation in credit disbursements to various sectors during FY17 which in turn had an adverse impact on income and profits,\u201d said experts at CARE ratings. The asset quality of the NBFC sector marginally improved in FY18 as the GNPA ratio moderated to 5.8% from 6.1% the previous year. However, the asset quality of the banking sector has declined at a much faster rate from 3.2% in FY13 to 11.6% in FY18. This moderation follows the recent change in the RBI framework to allow banks to raise their exposure to NBFCs to 15% from 10%. Also read|\u00a0Yes Bank share price dives 9% on ratings downgrade, but soon recovers 13% from day\u2019s low The sector is facing liquidity concerns which has adverse effects on sectors dependent on NBFCs for funding their growth, like infrastructure companies. The Global Financial Stability Report released by the International Monetary Fund has brought into limelight the systematic risks associated with shadow banking practices which might spill over to the banking system.