The Reserve Bank of India has credited Non-Banking Financial Companies (NBFCs) for the strong credit growth rate of 18 per cent in the country for October. Assets under management (AUM) represent the success of NBFCs, since it brings the total funds being managed by them for clients in focus. Buoyed by RBI’s praise, NBFCs have received further boost from ratings agency CRISIL, which has predicted a 14 per cent growth for AUMs in FY24.
Lower dependence on borrowing and higher capacity to absorb losses, have created strong balance sheets for the NBFCs, which will drive the growth according to CRISIL. The non-banking lenders are poised to provide easy access to cash and make the most of India’s credit demand, rising faster than deposits. At the same time firms might be affected by unexpected repo rate growths and inflation, apart from geopolitical uncertainty.
Home loans will be the driving force behind growth in business for NBFCs with a 45 per cent share, followed by car and bike loans, which account for 25 per cent of the assets under management. Apart from those, personal consumption will also drive demand for travel loans and consumer loans, picked up to buy durables. Major players in the NBFC space are focusing on unsecured loans, which are 10 per cent of the assets.
NBFCs may face competition from big banks going forward, but the asset quality for these easy credit providers is expected to stay resilient according to CRISIL’s outlook. They may also be affected by rising interest rates on lending, as RBI might increase repo rates by 25 basis points.
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