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Ratings agency Crisil in its latest report has said that non-bank finance companies’ (NBFCs) asset growth will jump to a four-year high of 11-12 per cent this fiscal (FY23). It noted that the NBFCs segment has witnessed three consecutive years of constrained asset growth due to the COVID-19 pandemic, with the growth coming at 5 per cent in FY22. It said intense competition from banks and the rising interest rate scenario will limit the competitiveness of NBFCs in certain segments, leading them to focus on higher-yield segments for growth.

According to the report, vehicle finance, which constitutes nearly half of the assets for NBFCs, will grow at 11-13 per cent in FY23, as against 3-4 per cent in FY22 and FY21. Used vehicle financing, with its higher yields, will see higher growth and will drive the NBFC volume in vehicle finance. Other trends which will help asset growth will be improvements in vehicle sales, strong demand from infra sector and need for fleet replacements, it said, adding that new launches will drive car and utility vehicle sales. Competition from banks and the rising interest rate scenario will take the edge off NBFCs in the new vehicle finance segment and allow banks to gain market share in this space.

The report further said unsecured loans comprise consumer loans (personal loans and consumer durable loans) and business loans to small and medium enterprises (SMEs). Consumer loans will be supported by rising retail spend across consumer durables, travel, and other personal consumption activities, while business loans will benefit from macroeconomic tailwinds given the expected growth of 7.3 per cent in gross domestic product (GDP) this fiscal. Loans against property are also expected to touch 10-12 per cent growth, though competition will keep higher growth at bay in this space, too.