NBFCs Outpace Banks With 21% Deposit Growth In FY24

RBI reduced the number of deposit-taking NBFCs to 25 in FY24 from 34 the previous year, citing concerns over the regulatory framework for NBFCs, which is less stringent compared to that of banks

Non-bank lenders have increased their deposit base by 21 per cent in FY24, in contrast to the more modest 13.5 per cent rise experienced by banks, according to data from the Reserve Bank of India (RBI). Major non-banking finance companies (NBFCs) like Bajaj Finance and Shriram Finance are attracting savers by offering interest rates approximately 150 basis points higher than those provided by banks. 

Moreover, entities such as Indiabulls Housing and Nido Home Finance (formerly Edelweiss Housing Finance) are stepping up the competition by offering even more competitive rates, as per a report from The Economic Times.

Fixed deposit rates for a year at five major banks range from 6 per cent to 7.25 per cent. The RBI's Handbook of Statistics on the Indian Economy reveals that the total public deposits held by NBFCs reached Rs 1.03 lakh crore by the end of March, marking a 20.8 per cent increase from the previous year. Notably, NBFCs have achieved a 20.8 per cent growth rate for two consecutive fiscal years, FY23 and FY24. In contrast, banks saw a 9.6 per cent growth in deposits during FY23.

Bajaj Finance reported a 35 per cent year-on-year increase in deposits for FY24, totalling Rs 60,151 crore, representing 20 per cent of the company’s consolidated borrowing. Shriram Finance also demonstrated significant growth, with a 23 per cent increase year-on-year, bringing its total to Rs 44,444 crore.

However, the RBI reduced the number of deposit-taking NBFCs to 25 in FY24 from 34 the previous year, citing concerns over the regulatory framework for NBFCs, which is less stringent compared to that of banks. This number has decreased from 240 a decade ago, as per the report.

Central bankers argue that while regulations for higher-rated NBFCs have become more calibrated, they still do not match the rigorous standards imposed on banks. NBFCs, with a minimum investment grade rating of "BBB—," can accept public deposits for terms ranging from 12 to 60 months. However, they are not allowed to offer current or savings accounts classified as demand deposits.