Non-banking financial companies (NBFCs) may lose 1 per cent market share to private banks by the next financial year (FY22) on the back of intense competition in housing and auto loan segments, said rating agency CRISIL. However, their asset growth may turn positive in FY22 after showing a contraction or flat growth in FY21.
The growth, though, will be muted at 5-6 per cent due to asset quality concerns, funding issues and competition from banks. Some green shoots are visible now and should restore confidence if these sustain over the next few quarters. While gold loans are growing at a fast clip, the growth of all other segments is expected to be lower than that seen in the past.
After a stellar growth of 18 per cent per annum in AUM between FY14 and FY18, the pace decelerated since the credit event of September 2018 (IL&FS crisis), it said.
This was primarily due to funding access challenges, followed by asset quality worries due to the pandemic this fiscal year. Gurpreet Chhatwal, president, CRISIL Ratings, said India’s GDP of is expected to grow 10 per cent in FY22. Yet, the NBFC sector growth is likely to be slower because access to funding remains a challenge due to concerns about the impact of the pandemic on asset quality.
Additionally, competition is expected to be more intense from banks — which are flush with low-cost deposits and better placed with improved capital buffer than in the previous years, he said.
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