The Virgin financial corporations (NBFCs) and housing finance companies (HFCs) have reason to be optimistic as their growth outlook receives a significant boost. According to ICRA Ratings, the projected growth for NBFCs and HFCs’ assets under management (AUM) has been revised upwards to 13-15% from the earlier estimate of 11-13%. This positive revision is primarily driven by an expected surge in the retail loan segment. As of March, the total sector AUM was around ₹40 lakh crore, encompassing retail, infrastructure, and wholesale loans.
Retail Loan Growth Propels Optimism
The retail loan portfolios of NBFCs are anticipated to witness substantial growth, with an expected rate of 18-20% in FY24, a considerable increase from the previous estimate of 12-14%. This upward revision is attributed to the strong performance of unsecured loans, which include personal and consumption loans, unsecured small enterprise loans, and microfinance loans. As of March 2024, NBFCs’ retail AUM was at ₹14 lakh crore.
Driving Factors Behind NBFC Retail Segment Growth
The surge in the NBFC-retail segment is likely to be fueled by the anticipated expansion of unsecured loans, expected to grow by 26-28%. As of March 2024, the outstanding unsecured loans stood at about ₹5.1 lakh crore. Additionally, secured NBFC-retail AUM, comprising vehicle finance, gold loans, secured business loans, etc., is projected to grow at a healthy rate of 14-16%.
Positive Prospects for HFCs’ Retail AUM
Housing Finance Companies’ retail AUM, which includes home loans and loans against property, is also expected to experience a growth rate of 12-14%. This estimate surpasses the earlier projection of 11-13%, indicating promising opportunities for the housing finance sector in the coming fiscal year.
Steady Outlook for Infrastructure and Wholesale Loans
While the retail segment is anticipated to witness significant growth, the outlook for infrastructure and other wholesale loans remains stable, with an expected growth rate of 10-12%. This indicates a well-rounded growth prospect for the NBFC and HFC sectors, encompassing various loan categories.
Positive growth prospects for NBFCs
The positive growth prospects for NBFCs and HFCs in FY24 can be attributed to various factors. One significant factor is the overall improvement in economic conditions, which is expected to drive consumer demand and borrowing. As the economy recovers from the impact of the pandemic, individuals and businesses are likely to seek financial assistance to support their aspirations and investments. Additionally, the ongoing focus of the government and financial regulators on strengthening the NBFC sector’s regulatory framework has instilled greater confidence among investors and borrowers alike.
Increasing penetration of digital technologies
Furthermore, the increasing penetration of digital technologies in the financial sector has enabled NBFCs to reach a wider customer base and offer more customized financial products. The ease of access to credit and the convenience of digital transactions have made NBFCs and HFCs attractive options for borrowers, especially in rural and semi-urban areas where traditional banking services might be limited.
In conclusion, the revised growth outlook of 13-15% for FY24 for NBFCs and HFCs comes as welcome news for the financial sector. The upward revision in the retail loan segment, driven by the strong performance of unsecured loans, indicates a promising trajectory for the industry. Factors like economic recovery, regulatory support, digital penetration, and the adaptability of these institutions have collectively contributed to this positive sentiment. However, as with any projection, it is essential for the industry stakeholders to closely monitor market dynamics and adapt to changing conditions proactively. Overall, the future seems bright for the NBFCs and HFCs as they continue to play a crucial role in fulfilling the financial needs of individuals and businesses across the country.
