India’s Leading BFSI & FinTech Companies 2024

[ NBFC SECTOR OVERVIEW ] India’s Leading BFSI and FinTech Companies 2024 31 Acknowledging the gravity of the crisis and its broader economic implications, the government launched ` 1 trillion first loss default guarantee program to provide first loss protection to all NBFC lending that met the criteria of the program. It also launched ` 250 bn alternative investment fund with government contribution of ` 100 bn to provide last-mile funding to stalled housing development projects. The RBI also took several steps such as reducing the risk weights for NBFC and encouraging banks to lend to NBFC. Besides more structural and long-term measures like imposition of liquidity-related regulations on NBFCs, moving the regulation of Housing Finance Companies (HFCs) to the RBI from National Housing Bank (NHB) and a stricter supervisory regime for NBFCs and HFCs were introduced by the RBI to strengthen regulation of NBFCs. PERFORMANCE OF NBFCS IN FY2023 CREDIT OFFTAKE In FY2023, NBFCs witnessed healthy expansion in their balance sheet led by double digit credit growth. Loan advances from NBFCs increased by 16% in FY2023 as against 9% in FY2022, despite increased competition from SCBs in vehicle and gold loan category. NBFCs mainly focused on segments such as unsecured loans, micro-finance loans, and MSME loans for credit expansion. With growth in unsecured loans (28.1%) being more than twice that of secured loans (11.5%), the share of secured loans in total NBFC credit fell to 69.5% at end-March 2023 from 72.4% at end-March 2022. PROFITABILITY Aggregate income of NBFCs witnessed robust growth of 21.5% in FY2023 as against 8.5% in FY2022 on account of increase in interest income. With decline in provisions for NPAs and improvement in operational efficiency as indicated by decline in cost to income ratio to 71.1% in FY2023 from 77.6% in FY2022, net profits of NBFCs grew significantly by 67.3% in FY2023 as against 57.3% in FY2022. With rise in income, key profitability ratios such as RoA, RoE and NIM also witnessed improvement in FY2023. Key profitability ratios of NBFCs witness improvement in FY23 (%) Source: RBI, Dun & Bradstreet Research Dun & Bradstreet