The non-banking financial company – microfinance institutions (NBFC-MFIs) have been showing a positive growth trajectory in the recent past with assets under management (AUM) rose 39.2% year-on-year to Rupees 1.3 trillion as on September 30, recent data from MFIN showed.
The AUM includes an owned portfolio of Rupees 1.1 trillion, and a managed portfolio of Rupees 24,501 crore. The gross loan portfolio of the overall microfinance industry rose 25% y-o-y to Rupees 3.8 trillion as on September 30.
The data further said for the July-September period, NBFC-MFIs disbursed loans worth Rupees 32,732 crore through 7.9 million accounts. They had disbursed loans worth Rupees 28,029 crore through 6.8 million accounts a year ago.
Loan disbursed by NBFC-MFIs falls
The data shared by the MFIN said the NBFC-MFIs disbursed loans worth Rupees 32,732 crore in July-September through 7.9 million accounts. Notably, for the same period last year, they had disbursed loans worth Rupees 28,029 crore through 6.8 million accounts.
However, the average loan amount disbursed by NBFC-MFIs fell 0.4% y-o-y to Rupees 41,373 in the September quarter.
A report by CareEdge has also noted that the bank lending to NBFCs jumped by around 3.8 times in around five-and-a-half years even as mutual funds cut exposure to NBFCs by 31.4% to mitigate risk.
In October, the credit exposure of banks to NBFCs stood at Rs 14.8 lakh crore, indicating a 22.1% y-o-y growth.
The credit extended by banks to NBFCs has exhibited a consistent upward trend over the last five years and continued its acceleration along with the phased reopening of economies after Covid pandemic.
Further, after the merger of HDFC Limited with HDFC Bank, the quantum of outstanding exposure of banks to NBFCs had reduced sequentially, albeit maintaining the y-o-y growth rate. In September 2023, the quantum of outstanding exposure reached the pre-merger level and in October 2023 moved past the same, the report said.
The report also highlighted that the proportion of NBFC exposure in relation to aggregate credit has risen from 9.4% in October 2022 to 9.6% in October 2023.
In a circular, the RBI said that on a review, it has been decided that the consumer credit exposure of NBFCs – outstanding as well as new – categorised as retail loans, excluding housing loans, educational loans, vehicle loans, loans against gold jewellery and microfinance/SHG loans, shall attract a risk weight of 125%. NBFCs’ loan exposures generally attract a risk weight of 100%.
Another key announcement that the RBI has made in terms of credit exposure is to increase the risk weights on exposures of SCBs to NBFCs by 25% points, over and above the risk weight associated with the given external rating, in all cases where the extant risk weight as per external rating of NBFCs is below 100%.
Also Read: RBI increases risk weight on consumer credit, bank credit to NBFCs
Speaking on the development, the RBI Governor Shaktikanta Das said, “We have also very recently announced a few macro prudential measures in the overall interest of sustainability. These measures are pre-emptive in nature. They are calibrated and targeted.”
“We continue to focus on strengthening governance and assurance functions, ensuring effective risk management and robust lending practices,” he added.
Also Read: Increase in NBFCs’ credit risk weight preemptive move, says Das; advises precautionary measures
