NBFC AUM to hit ₹30 lakh cr by FY23, Omicron a concern: CRISIL

Assets under management (AUM) of non-banking financial companies (NBFCs) are likely to grow 8-10% to ₹30 lakh crore in FY23 on the back of improving economic activity and strengthening of balance sheets, rating agency CRISIL has said. In the current fiscal, it is estimated to grow at 6-8% to around ₹27 lakh crore.

Overall fragile assets of NBFCs are also likely to rise to 5-6% of the industry’s AUM at ₹1.3-1.6 lakh crore by March next year, according to the agency.

It has, however, cautioned that the projection does not factor in the likely impact of the recently discovered South African strain of the coronavirus, Omicron, terming it a ‘risk factor’.

“Many NBFCs have built higher liquidity, capital and provisioning buffers in the recent past. That, combined with improving economic activity, puts them in a comfortable position to capitalise on growth opportunities,” says Gurpreet Chhatwal, managing director, CRISIL Ratings

“However, competition from banks will intensify. Asset quality worries have also manifested due to recent regulatory clarifications, and uncertainty over the performance of the restructured book. Net-net, growth will be driven by NBFCs with strong parentage and better funding access in the two largest segments — home loans and vehicle finance,” adds Chhatwal.

According to CRISIL, larger NBFCs are gaining share due to organic consolidation. “In three financial years through 2021, the market share of the top five NBFCs has risen 600 basis points (bps) to 46%. The ability to identify niches that cater to the relatively difficult-to-address customer segments and asset classes will fuel long-term growth for the sector.”

Retail loans are expected to see reasonably broad-based growth in the current and next fiscals supported by pick-up in demand and rising sales. Gold, home and unsecured loans should clock the fastest growth rates, the agency says in a presentation.