NBFCs’ asset growth to reach four-year-high: Crisil

The growth rate is expected to increase by 11-12% in FY23

September 13, 2022

The current year’s growth rate is pegged at 5%

Finance for vehicles, which comprises half of the assets for NBFCs is expected to grow by 11-13%

Unsecured loans will reach 20-22% in FY23

Consumer loans, such as consumer durable loans & personal loans, and business loans to Small and Medium Enterprises (SMEs) together constitute unsecured loans

Asset growth for NBFCs is expected to increase by 11-12% in FY23, recording a four-year-high growth rate according to a report from credit rating agency Crisil. 

NBFCs have seen constrained asset growth due to the pandemic as per the report and the current year’s growth rate is pegged at 5%. Experts said that even though the asset growth jumps to double digits, it is expected to be lesser than the pre-pandemic levels. The asset growth rate was seen at 20% for three years up to 2019. 

This was mostly led by rising competition from banks, as their increasing of interest rates has limited the competitiveness of NBFCs in certain segments. For growth, NBFCs are focusing on higher-yield segments.

According to the report, finance for vehicles, which comprises half of the assets for NBFCs is expected to grow by 11-13% as compared to 3-4% in FY22 and FY21. As used vehicle financing is known to bring higher yields, it is expected to see higher growth. Improvements in vehicle sales, strong demand from the infra sector need for fleet replacements, and newer launches are expected to drive further asset growth. 

In terms of NBFC departments that will expect pre-pandemic level growth, experts said that unsecured loans will reach 20-22% in FY23 as they have the largest share of Assets Under Management (AUM) in NBFCs at about a fifth. 

They further added that NBFCS saw a decrease in AUMs for unsecured loans last year due to them being cautious, however, this year saw a V-shaped recovery. 

The report said that rising retail spending across consumer durables, travel and other personal consumption activities will support the growth of consumer loans, whereas, macroeconomic tailwinds due to the expected 7.3% growth in GDP will drive business loans. Consumer loans, such as consumer durable loans, & personal loans, and business loans to Small and Medium Enterprises (SMEs) constitute unsecured loans.  

Property loans and gold loans are expected to reach 10-12% growth. The latter is supported by demand from micro-enterprises to fund working capital and individuals to seek them for personal requirements.  

Source: Business Standard