The year 2023 was filled with multiple game changing developments for the NBFC sector with a slew of measures from the regulator. The overall NBFC sector this year continued with healthy growth disbursements led by buoyant demand.
The sector played a pivotal role in the economy, complementing traditional banks by channelling funds into various sectors. In 2023, many have engaged in co-lending partnerships with major banks, offering varied lending options.
There was also an upswing in appetite for credit, especially from the MSME sector. The recent MSME Pulse Report showed that the demand for commercial loans witnessed a 33% Y-o-Y growth during the January to March period. As the year progressed, the demand momentum persisted.
Also, the NeoGrowth MSME Business Confidence Study 2023 revealed that 3 out of 4 MSMEs were confident of India’s economy and 96% MSMEs expected their profits to increase during the year.
Here are the top five developments that took place in the NBFC sector in 2023:
RBI’s unsecured lending norms
The central bank in its circular said 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%.
Also, it announced increase in 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
The NBFC leaders had reacted on the regulator’s move saying it will help in maintaining financial stability, set aside additional capital.
Also Read: Help in maintaining financial stability, set aside additional capital: Experts on RBI’s risk weight move
Release of original property documents
Another key development that unfolded was the RBI instructing lender that once the borrower makes the full payment towards a loan, lenders shall release all the original movable/immovable property documents and remove charges registered with any registry within a period of 30 days.
In a breather to the borrowers, RBI said for delays attributable to the REs, beyond 30 days, they will compensate borrowers at a rate of Rs 5,000 per day for each day of delay.
Also Read:Release all original property documents within 30 days of loan repayment: RBI instructs lenders
The HFCs had welcomed the move however, the affordable segment hoped leeway.
Also Read:HFCs welcome RBI’s move on property documents, affordable segment hopes leeway
HDFC merger with HDFC Bank
This was one of the game changing development that the NBFC sector witnessed this year. However, the foundation was laid way back. Following the reverse merger, HDFC Ltd. merged with its subsidiary HDFC Bank on 1st July 2023.
Following the merger, the analyst said about Rs 1.5 lakh crore of bank limit is now available for other NBFCs as well as housing financiers.
Deepak Parekh hanged his boots as the Chairman of HDFC leaving behind his over four decades of legacy during which he took the Housing Development Finance Corporation Limited to the top, along with meeting the housing dreams of millions.
The board meeting on the merger was his last one being on the position, and he walked out of Ramon House in the evening which was special in its kind.
Post his retirement, ETBFSI curated his 40 years journey.
Read: Glimpse of Deepak Parekh’s over 40 years long journey
Entry of Jio Financial Services
Mukesh Ambani-led Reliance Industries Ltd’s demerged entity Jio Financial Services, formerly Reliance Strategic Investments, entered into the NBFC business this year making a buzz in the sector.
The business wassetup in a partnership with BlackRock under 50:50 joint venture. Blackrock is world’s largest Asset Management Company (AMC) that will provide simple and trustworthy investment solutions. The company is managing assets over USD 11 trillion.
Mukesh Ambani believed the joint venture will synergise the respective strength of JFS and BlackRock. It will help deliver technology-enabled, affordable, and innovative investment solutions.
Also Read:Mukesh Ambani’s three reasons to bet on Jio Financial Services
Fintechs’ hunt for NBFC license
With NBFC licenses issued to fintech majors such as Cred and Jupiter, multiple fintechs have pursued the banking regulator for a NBFC license this year.
However, the regulator was reluctant to consider their applications due to the overlap in captable or capital structures of these fintechs.
Once a fintech takes the form of NBFC, its business gets built on the leverage from bank loans.
