The economic disruption due to the Covid-19 pandemic hit businesses of finance companies badly, causing a sharp contraction in their lending activity in the second quarter ended September 2020. The overall NBFC sanctions contracted 32 per cent year-on-year (YoY).
The lending in most of the segments, including housing, auto vehicle (personal and commercial) declined sharply. Only exceptions were used tractors, gold loans, loan against shares, which saw growth in the second quarter of this financial year. The rural economic activity was steady and was relatively less impacted, which supported tractor and gold loan segments.
With gradual unlocking of activities in June, industry begun to see resumption of work. This also got reflection in the sanctions, which were higher in the second quarter over the first quarter across many segments.
The improvement in liquidity for NBFCs, pent-up demand, and better accessibility ahead of the festive season gave traction to activity in the July-September 2020.
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