Even as Reserve Bank of India Governor Shaktikanta Das advised non banking financial companies (NBFCs) to further strengthen their asset liability management and avoid all forms of exuberance regarding credit growth at the overall, sectoral and sub-sectoral levels, the assets under management (AUM) of NBFCs are set to log a healthy 14-17 per cent growth next fiscal on the back of continued strong credit demand across retail loan segments.
Retail credit growth continues to be driven by sound underlying macro and micro factors. The two largest traditional segments of home loans and vehicle finance now comprise 25-27 per cent each of the NBFC AUM. Both segments are expected to report steady growth. In the home loan segment, growth of 12-14 per cent next fiscal will be driven by HFCs’ focus on affordable home loans (ticket sizes of less than Rs 25 lakh), while vehicle finance is expected to grow 18-19 per cent this fiscal and sustain 17-18 per cent growth next fiscal on the back of solid underlying-asset sales.
However, growth of AUMs may be moderately lower than 16-18 per cent expected in the current fiscal because unsecured retail loans — the fastest growing segment in the AUM pie of the NBFCs so far — are likely to see a relatively slower growth as these financial entities recalibrate their strategies due to the recent regulatory measures issued by the RBI, finds CRISIL. The RBI Governor has flagged the need for NBFCs – amidst galloping credit growth in the current period — to take care that expansion of the credit portfolio itself and pricing of the same is in sync with risks envisaged. Das has also expressed concern over increased reliance on high cost short term bulk deposits while the tenure of the loans, both in retail and corporate loans, is getting elongated.
As NBFCs are large net borrowers of funds from the financial system, with their exposure from the banks being the highest, Das has suggested that the NBFCs should focus on broad basing their funding sources and reducing over-dependence on bank funding, at a recent FICCI platform, FIBAC.