MUMBAI: Unsecured loans by NBFCs expanded at a compound annual growth rate (CAGR) of about 32% during FY2017-2024. While this growth is on a lower base, it is double the growth rate of retail secured loans such as vehicle, home, gold and property loans during the same period.
According to a report on NBFCs by Assocham and ICRA, the share of unsecured retail loans in NBFCs is estimated to have increased to 14% of the overall NBFC credit. If the large chunky loans to infrastructure projects by lending institutions were to be excluded, the share of unsecured loans would be 23%, of the NBFC portfolio up from 5% in March 2016.
The retail unsecured loans which grew at a much higher pace include microfinance, personal and consumption loans and unsecured SME loans, which expanded at a higher pace. The unsecured book pushed the growth in retail loans to an 18% CAGR during FY2017-FY2024.
In overall lending as well, NBFCs have steadily improved their market position by expanding at a healthy CAGR of around 15% during FY2017-2024, which is higher than the 11% CAGR achieved by banks during this period.
“NBFCs registered a robust expansion in the last two financial years, boosting their position in the overall financial ecosystem. However, their improved systemic importance and higher interconnectedness, especially with the banking sector, have led to increased regulatory oversight and actions in the recent past,” said Karthik Srinivasan, senior VP, ICRA.
