IGI Logo

Credit rating agency ICRA in its latest report has revised upward the growth outlook for the current financial year (FY24) for the retail loans of Non-Bank Financial Companies (NBFC-Retail) and Housing Finance Companies (HFC-Retail), which account for the bulk of the overall sector.

According to the report, the NBFC-Retail asset under management (AUM), estimated at around Rs 14 lakh crore as of March 2023, is expected to grow at a higher pace of 18-20 per cent in FY24 vis-a-vis the previously estimated level of 12-14 per cent, as growth in the unsecured loans segment, consisting of personal & consumption loans, unsecured small enterprise loans and microfinance loans, would remain strong. At the same time, it said the HFC-Retail AUM estimated at around Rs 7 lakh crore as of March 2023, consisting of home loans (HL) and loan against property (LAP), is expected to grow at a relatively moderate 12-14 per cent (albeit higher than the previous estimate of 11-13 per cent) during the same period on the back of rising competition from banks.

The report further said with a growth expectation of 10-12 per cent in the infrastructure and other wholesale loans of NBFCs and HFCs, the total sector AUM, consisting of retail and other wholesale loans (including infrastructure loans), that stood at about Rs 40 lakh crore as of March 2023, is estimated to grow at about 13-15 per cent in FY24. The NBFC-Retail AUM grew by a robust pace of about 26 per cent in the last fiscal, on the back of an uptick witnessed in all loan segments but was primarily driven by the unsecured loans, which expanded by 44 per cent. Unsecured loans increased at a CAGR of 27 per cent over the five-year period ended FY2023, while secured loans grew at 11 per cent during the same period, and unsecured loans expected to remain the key growth driver in the current fiscal too. The jump in unsecured credit can also be partly attributed to the borrower-focused approach of entities vis-a-vis their product-focused approach in the past.