Select Page

The year 2023 has remained a year of developments for the Non-Banking Financial Companies (NBFCs) as they witnessed a slew of measures from the regulator as well as a rosy credit outlook.

In an interaction with ETBFSI, leaders of NBFC sector shared their views on how the year flared for them.

They believe that in 2023, the NBFC sector has dominated a range of lending sectors – from secured to unsecured loans – and the coming year will be dominated by innovative financing model.

George Alexander Muthoot, MD, Muthoot Finance

The overall NBFC sector has continued with healthy growth disbursements led by buoyant demand. In 2023, Muthoot Finance witnessed good growth over the quarters owing to increased demand trends in both urban and semi-urban markets. The recent festive period further spurred consumers’ discretionary spending which worked well in our favour. Muthoot gold loan assets under management (AUM) demonstrated strong growth and we also witnessed a spike in gold loan advance to new customers in H1FY24. Through Muthoot Finance’s gold loan overdraft facilities, we have been able to offer credit facility to customers against the collateralized asset allowing them to avail credit whenever they need funds to cover expenses.

In addition, the gold price factor has been historically high enabling us to disburse higher credit in the economy.

Our outlook for 2024 is very optimistic – our gold loan business is poised for significant growth and we are also planning to steadily increase the share of our non-gold loan book in the upcoming year with an aim to increase the share of non-gold loan book to 15-20% in the next five years.

New age technology like AI/ML will play a crucial role in democratising financial services and reaching the underserved through automated processes like loan approvals, personalized services, product innovation and enhanced customer satisfaction. Our digital strategies will involve furthering financial inclusion and expanding our reach in unbanked areas, particularly in Tier 2 and 3 cities and growing our phy-gital footprint in 2024.

Pankaj Gupta, Chief Business Officer at Godrej Capital

NBFCs have transcended their traditional role, establishing distinct identities and dominating a range of lending sectors, from secured to unsecured loans. Their risk navigation has grown significantly with the integration of evolving technologies and public infrastructure, addressing the substantial credit gap in India. NBFCs have efficiently met diverse credit needs, from MSMEs to retail consumers.

NBFCs play a pivotal role in the Indian 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.

The future of NBFCs in India looks promising as they play a crucial role in providing credit to underserved sectors, skillfully adapting to the digital era, and navigating regulatory changes. Positioned to shape the future of lending, NBFCs, with ongoing government support and their own resilience and innovation in digitization and technology, are set to remain pivotal in India’s financial landscape.

Hardika Shah, Founder & CEO, Kinara Capital

2023 has been a momentous year. The buoyancy in the manufacturing sector, strong domestic demand for goods and services, and the continued resilience of the economy have enabled India to maintain its status as a nation to watch out for. In fact, the resilient growth has had a ripple effect on all industries, including last-mile lending.

In 2023, the sector saw an upswing in appetite for credit, especially from the MSME sector. According to Crisil’s MSME Pulse Report, 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. At Kinara Capital, too, we saw a 150% Y-o-Y growth in inquiries during the festive period, indicating strong demand for credit from small entrepreneurs.

Looking ahead, we expect the momentum to continue. Beyond the rise in demand for credit, we anticipate innovative models of financing to take center stage and become key levers in driving the financial inclusion of MSMEs.

Some of the major trends that are poised to impact MSME lending in 2024 are Embedded Finance, Improved MSME Formalisation, and Rise in Tech-Enabled Alternative Credit Assessment Models.

Jyoti Prakash Gadia, Managing Director at Resurgent India

The micro finance sector and the retail sector have shown estimated growth of around 20 % under the NBFCs domain.The overall credit to GDP ratio of NBFCs has also shown a healthy trend in the recent past.

The regulatory backing of NBFCs has matured over the period, with RBI duly recognising the critical role played by NBFCs to bridge the gap in the total credit requirements of the economy.

As a result more robust regulatory benchmarks are being stipulated with requirements of better governance structure to ensure stability and sustainability.

In terms of the recent RBI guidelines stipulating 25 basis points higher risk weights on lending by scheduled commercial banks to NBFCs,the sources of funds for the NBFCs are becoming scarer and costlier. This will prove to be challenging development for NBFCs to contend with. Although asset quality of NBFCs has improved in the recent past,the sudden growth of unsecured credit needs a watchful eye.

On the technology usage front the NBFCs have an edge with a proven customer orientation and tie ups with Fintechs to deliver more innovative products in a faster and smoother manner.Use of AI and machine learning is also expected for creating more customer centric services in a cost effective manner. Higher costs of funds and competition are challanges which need to be addressed by the NBFCs .The opportunities are emerging with greater orientation towards consumerism by the growing middle class and availability of latest technology to be a part of digital transformation to spread its wings

  • Published On Dec 22, 2023 at 02:11 PM IST

Join the community of 2M+ industry professionals

Subscribe to our newsletter to get latest insights & analysis.

Download ETBFSI App

  • Get Realtime updates
  • Save your favourite articles

icon g play

icon app store

Scan to download App
bfsi barcode

Share it on social networks