NBFC AUM Poised for Significant Growth Amid Competitive Pressures

NBFCs in vehicle finance and home loans sectors are projected to grow AUM by 18-19%, according to Crisil Ratings. GST cuts boost vehicle sales, driving future growth to 16-17%. Despite strong bank competition, AUM growth is supported by premium vehicle demand and used-vehicle financing.

Crisil Ratings has forecasted an 18-19% growth in assets under management (AUM) for non-banking financial companies (NBFCs) involved in vehicle finance and home loans—segments that constitute nearly 44% of the overall NBFC AUM.

The report highlights that recent Goods and Services Tax (GST) reductions have significantly boosted sales across various vehicle categories, particularly cars. This positive trend is expected to persist, contributing to a 16-17% growth in unit sales over the current and upcoming fiscal years.

Despite robust competition from banks in the new vehicle financing sector, growth will be buttressed by an increasing consumer preference for premium vehicles and a focus on financing used vehicles. However, in the home loan sector, which makes up about 22% of NBFC AUM, growth is projected at a slower 12-13% over the next two fiscal years, compared to approximately 14% last year. Intense competition from public sector banks and moderated growth in residential real estate sales in key cities could pose challenges.

Commenting on these developments, Crisil Ratings' Chief Ratings Officer, Krishnan Sitaraman, noted, "Vehicle finance and home loans are poised for steady growth despite heightened competition. NBFCs are likely to proceed with a risk-calibrated approach, especially in MSME and unsecured loan segments, given the higher customer leverage." The report also predicts NBFCs' total AUM will surpass the Rs 50 lakh crore mark by March 2027.

(With inputs from agencies.)