NBFCs expected to see 14% loan growth in FY23: Ind-Ra

The gold lending segment could see moderate growth along with gold prices as well as other funding avenues opening up for borrowers.

Non-banking financial companies (NBFCs) are expected to record 14% year-on-year loan growth in the next financial year on the back of increased demand in the secure asset class segment, India Ratings & Research said in its outlook. for fiscal year 23 for non-banks. bank lenders. The rating agency expects NBFCs to see loan growth of 7-8% in FY22.

Products such as loans against property (LAP) and home and vehicle loans could see higher demand than personal and unsecured business loans which have seen higher demand during the pandemic, he said. he said, adding that growth in the auto finance segment could resume depending on the availability of vehicles facing component shortages. The gold lending segment could see moderate growth along with gold prices as well as other funding avenues opening up for borrowers.

NBFCs would start the year with sufficient capital buffers, stable margins and significant balance sheet provisioning, while adequate system liquidity would facilitate funding. Nonetheless, an expected increase in systemic interest rates and asset quality issues in some segments due to the lagged impact of the pandemic would be a drag on operational performance,” India Ratings said.

The agency expects NBFC Phase 3 assets to grow to 6% by FY23 from 5.6% at the end of December, primarily due to slippages in the restructured and program-supported book Emergency Line of Credit Guarantee (ECLGS). However, the impact on the cost of credit is expected to be moderate as NBFCs have created adequate provisioning reserves. Also, rising interest rates are likely to impact the incremental cost of borrowing for all lenders, he added.

Housing finance companies are expected to grow 13% year-over-year in FY23 due to increasing geographic penetration and a potential increase in loan size, in part due to inflation assets. “India Ratings estimates that the sector could grow by 13% year-on-year in FY23 (FY22: 11%) with Stage 3 raw numbers rising by 2.8% in 3QFY22 (FY22: 2.9 %), largely due to the slippages of the restructured book (FY23: 1.7%; FY22: 2.1%). In addition, 2% of assets under management are backed by loans under the ECLGS , which could also experience slippages. The overall number in Stage 3 could increase by 70 basis points as seen in 3QFY22 due to the change in the NPA recognition standard,” said Ind-Ra, now its “neutral” sector outlook and a “stable” rating outlook for NBFCs and HFCs.

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