NBFCs To Have 19% Pie Of Overall Loan Market By FY20: Report
The share of non-banking financiers in the overall loan market might go up to 19 per cent by the financial year 2020 from 16 per cent in the financial year. This is primarily because of their strong play in the wholesale segment, says a report.
This will be possible on the back of an 18 per cent annual growth in non-banking finance companies (NBFCs) loan books over the next three years, says a Crisil report.
The agency said NBFCs would be able to increase their share in the overall pie despite increasingly aggressive play by private sector banks in the retail segment, and also a possible toughening of stance from the state-run ones after the recently announced capital infusion.
The NBFC segment had taken four fiscals for a three-percentage- points jump in the share in the overall loans, from 13 to 16 per cent, it said.
"While NBFCs would continue to do well in their traditional stronghold of retail finance, they are seen growing fastest in the wholesale finance segment, which would provide a kicker to their overall credit growth," it said.
Share of wholesale credit in the overall NBFC credit pie was also expected to increase to 19 per cent by 2020, from 12 per cent in 2014, it said.
The agency said NBFCs, many of them driven by strong parentage, started focusing on the wholesale segment about five years ago.
"The opportunity in realty and the structured credit space has gone up materially after the implementation of the real estate law and the rising demand for mid-corporate promoter financing," Crisil President Gurpreet Chhatwal said.
He said in infrastructure financing, highways offered a large and growing opportunity. He, however, cautioned that there was a concentration risk here because of large-ticket sizes.
The report said home loans would grow at 18 per cent over the next three financial years on a sharper focus by the housing finance companies on the self-employed borrowers and lower- ticket-size segments.
On the asset quality front, which has been one of the most- worrying factors for the banking system, it said the share of dud assets had been stable so far on a better understanding of customers, product innovation and differentiated value proposition for NBFCs.
But, the NBFCs would have to balance the risk-reward ratio as increasing competition puts pressure on yields, it said, recommending proactive investments in technology to aid the non-banking lenders.
"Growth of fintechs is an opportunity for collaboration for NBFCs on the origination side and not a competition," Senior Director Krishnan Sitaraman said, adding the benefits will stem from better quality and lower cost of origination, stronger underwriting norms, more focused identification of customers and expansion of the target-market segment.
With inputs from Housing News