NBFCs’ AUM to rise 13-15% in FY24 led by 18-20% retail loan growth: ICRA
growth forecast for NBFCICRA Ratings said on Thursday that housing finance and housing finance companies improved to 13-15 percent from 11-13 percent earlier thanks to an upward revision in its retail loan growth forecast.
The total assets under management of the sector, consisting of retail, infrastructure and wholesale loans, was around INR 40 crore at the end of March.
The ratings agency said non-bank retail loan portfolios are expected to grow 18-20 percent in FY24 versus 12-14 percent earlier, and attributed the revision to strong growth in unsecured loans — which includes personal and consumer loans, unsecured small business loans and microfinance loans. The NBFCs retail assets under management were at ₹ 14-lakh crore as of March 2023.
A.M. Karthikings Vice President, Head of Finance, Karthikings said, “The high growth in NBFC’s retail segment will be driven by an expected 26-28 per cent expansion of unsecured loans, which is around INR 5.1 crore as of March 2023. NBFC-Secured Individuals’ owned assets, consisting of Vehicle Finance, Gold Loans, Secured Business Loans etc., together are expected to grow at a relatively subdued albeit rate healthy by 14-16 percent.
HFC retail assets under management of Rs.7 crore as of March 2023, which includes home loans and loans against property, are expected to grow at 12-14 per cent, also higher than the previous estimate of 11-13 per cent.
On the other hand, growth prospects for infrastructure and other wholesale loans remained unchanged at 10-12 percent, according to the International Public Relations Agency.
In fiscal ’23, non-banking individuals’ assets under management grew 26 percent, led by 44 percent in unsecured loans. Unsecured loans have grown at a compound annual growth rate of 27 percent over the past five years while secured loans have grown by 11 percent.
“Unsecured loans will face higher credit losses even on a steady-state basis versus most other secured lending segments; loan losses for this segment will be around 4-6 per cent on a collective basis,” Karthik said.
additional funding
To support growth, NBFCs and HFCs are estimated to require additional financing of INR4.7-5.0 crore in FY24, in addition to refinancing outstanding/matured debt, ICRA said, adding that the weighted average cost of funds is likely to rise by 60-80 basis points for the year driven by continued repricing of lending rates.
The return on assets under management (RoMA) for non-bank financial institutions is seen moderate to 2.6-2.8% in FY24 from 2.8% in FY23, while HFCs are seen to rise to 1.7-1.9% from 1.7% in FY23 due to their large share of variable rate loans.