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Healthy demand, along with increasing level of economic activity, is expected to boost non-banking financial companies-housing finance companies (NBFC-HFC) growth in FY23, says ICRA Ratings.

According to the agency, the second wave of the pandemic impacted disbursements of HFCs in Q1FY22.

However, the same was followed by a sharp recovery in Q2FY22.

As of September 30, 2021, the on-book portfolio of NBFC-HFC in India is estimated at Rs 11.6 lakh crore, registering a YoY growth of 9 per cent in H1FY22.

"Going forward, the growth trend is expected to continue driven by healthy demand in the industry, increasing level of economic activity and increasing vaccination in the country," the agency said.

"There would, however, be downside risk in case of significant disruptions caused by the new wave of infections in Q4FY22 or future waves, if any."

Further, ICRA pointed out that measures taken by the regulator to strengthen the structural, regulatory and supervisory framework for the NBFCs could lead to increased focus on internal controls, which can, in turn, can also impact sectoral growth.

"Given the last three years of moderation in growth, the pent-up demand is expected to help the industry witness growth in the portfolio in FY22 with the trend expected to continue in FY23 as well," said Sachin Sachdeva, Vice President and Sector Head, Financial Sector Ratings, ICRA.

"However, this would be subject to the impact of the ongoing third wave. Nevertheless, initial trends, as discussed with industry players, indicate limited impact of the third wave on the industry's operations."

Consequently, ICRA has retained its growth estimate of 8-10 per cent for the on-book portfolio of HFCs in FY22.

Further, HFCs on-book portfolio is estimated to grow by 9-11 per cent in FY23.