India’s Leading BFSI Companies 2020

XXIV Sectoral credit split Agriculture and Allied Services 3% Services 16% Retail Loans 1% Other non-food Credit 6% Micro and Small 2% Medium 1% Large 28% Others 24% Industry 55% Credit extended by NBFCs continued to grow in fiscal 2019. Industry is the largest recipient of credit provided by the NBFC sector, followed by services. Credit to industry and services was subdued in relation to the previous year. However, growth in retail loans continued its momentum. Profitability of NBFCs The profitability indicators of NBFCs– return on assets (RoA), return on equity (RoE) and net interest margin (NIM) decreased in fiscal 2019, reflecting the stress in the sector. The overall decrease in profitability was driven by NBFCs- ND-SI for almost all categories. For NBFCs-MFI, profitability improved considerably. However, NBFCs-ND-SI posted an improvement in profitability indicators in the current financial year till September 2019, on the back of decline in other expenses. 0 2 4 6 8 FY17 FY18 FY19 % RoA RoE NIM Conclusion Although the balance sheet size of the NBFCs constitutes 18.6% of SCBs, it has emerged as an important pillar of the Indian financial system. The sector, which had witnessed a robust expansion in fiscal 2018, experienced headwinds in fiscal 2019 as market sentiments turned negative post-IL&FS event and recent defaults by some companies. The Reserve Bank and the government have taken several measures to restore stability in the NBFC space. The Reserve Bank took measures to augment systemic liquidity, buttress standards of asset-liability management framework, ease flow of funds by relaxing ECB guidelines and strengthen governance and risk-management structures. The government provided additional support through the partial credit guarantee scheme, encouraging PSBs to acquire high-rated pooled assets of NBFCs. Furthermore, the Finance Bill 2019 through amendments in the RBI Act, 1934 conferred powers on the Reserve Bank to bolster governance of NBFCs. These measures are geared toward allaying investors’ apprehensions and aiding NBFCs in performing their role better. Going forward, the Reserve bank will continue to maintain constant vigil over NBFCs and take necessary steps to ensure overall financial stability. Dun & Bradstreet