NBFC Sector Faces Moderation in Growth Amid Regulatory Curbs

In FY25, Non-Banking Finance Companies (NBFCs) will see asset growth moderation and an increase in non-performing assets. This slowdown is driven by regulatory measures and concerns over unsecured loans. Despite needing significant funding, new sources beyond traditional banks are sought to sustain growth.

The growth of Non-Banking Finance Companies (NBFC) in terms of assets under management is expected to moderate in FY25, according to a domestic rating agency. This year will also see an increase in dud assets.

NBFCs, operating across various segments, are projected to show 13-15% growth in assets under management in FY25, down from 18% in FY24. Regulatory measures on bank lending and concerns over unsecured loans have largely impacted this slowdown, said Icra Ratings.

Furthermore, the sector is anticipated to witness a 0.30-0.50% increase in delinquencies. Karthik Srinivasan, the agency's group head, indicated that the sector's best days on delinquencies are behind it. Contributing factors include high growth in the last two years, over-leveraged borrowers, and inadequate assessment practices. To sustain credit growth, the sector needs up to Rs 6 lakh crore in funding, necessitating looking beyond the mainstay of bank funding.