NBFCs To See Moderate Growth In Assets Of 16-18% In FY24: CRISIL

The rating agency attributed this slowdown to the comparatively weaker expansion on unsecured retail loans due to the recent regulatory changes issued by the Reserve Bank of India. 

The agency noted that home loans and vehicle finance now account for 25-27 per cent each of the NFBC AUM.

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The Indian NBFC sector is projected to reach a moderate growth of 16-18 per cent in the current financial year, CRISIL Ratings said on Wednesday. The rating agency attributed this slowdown to the comparatively weaker expansion on unsecured retail loans due to the recent regulatory changes issued by the Reserve Bank of India. 

The rating agency noted that assets under management (AUM) of the non-banking financial companies (NBFCs) are estimated to record a healthy 14-17 per cent growth over the next fiscal year due to the consistent robust credit demand across retail loan segments, reported PTI. 

The growth could be moderately lower than the 16-18 per cent expected in the 2023-24 fiscal year as unsecured retail loans, which account for the fastest growing segment in the NBFC AUM pie till now, are likely to see relatively slower growth. This slowdown has been attributed to the revised norms which have made NBFCs reconsider their strategies. 

This growth strategy will be majorly driven by the diversification in product offerings and funding profile going ahead. The agency noted that retail credit growth remained to be dominated by robust underlying macro and micro factors. 

Private consumption is also going well above the long-term average owing to the strong trend being seen in retail spending on homes, vehicles, and consumer durables. The agency noted that supported by healthy balance sheets, NBFCs have been quick to benefit from the retail credit-growth wave. 

Gurpreet Chhatwal, CRISIL Ratings MD, noted that the recent regulatory norms are aimed at unsecured retail loans and don't affect the secured asset categories, and growth is estimated to be steady in these segments while speaking at a webinar. 

The agency further noted that home loans and vehicle finance now account for 25-27 per cent each of the NFBC AUM. Both these segments make up the two largest traditional categories of the AUMs. 

The home loan segment is estimated to grow at 12-14 per cent in the next fiscal year and will be dominated by the focus on affordable home loans, while th vehicle finance is projected to increase 18-19 per cent in FY24 and maintain a growth rate of 17-18 per cent during 2024-25 owing to robust underlying-asset sales. 

“Unsecured loans is now the third largest segment in the NBFC AUM pie. And this segment is likely to see a moderation in growth due to the regulatory measures which affect NBFC AUM growth on both their asset and liability sides on three fronts,” Chhatwal said. According to CRISIL’s projections, bank loan borrowing costs for NBFCs could possibly increase by 25 to 50 bps.