NBFCs in India Brace for a Tough Financial Year Amid Slowdown

In FY25, India's NBFCs may face challenges due to reduced loan disbursements and stringent regulations, Nomura reports. Despite past robust growth, unsecured loans and auto financing could struggle, although SME and property loans may hold steady. Elevated funding costs and limited rate cut prospects compound sector pressures.

A Nomura report foresees a challenging 2025 for India's non-banking financial companies (NBFCs), attributing the pressure to reduced loan disbursements and regulatory hurdles. The growth in assets under management (AUM) seen in the previous years seems to be waning.

The report indicates a decline in loan disbursement growth, driven by concerns over asset quality, particularly in unsecured loans like personal and credit card loans. Additionally, tighter regulatory control and a slump in vehicle sales are expected to impact auto loans, especially for new vehicles.

Despite these challenges, some areas, such as SME loans and used vehicle financing, show promise. However, the NBFC sector faces compounded pressure from high borrowing costs, as hopes for interest rate cuts dwindle. The moderation in bank loan growth to NBFCs may push them towards more expensive funding solutions.

(With inputs from agencies.)