Non-banking finance sector’s credit sanctions growth experienced a sharp decline, dropping to 5.7 percent year-on-year (Y-o-Y) during the first quarter of the fiscal year 2023-24 (Q1FY24). This marked a significant decrease from the previous year’s Q1FY23, which had seen growth exceeding 100 percent Y-o-Y. The dip was attributed to call the “base effect,” as well as a substantial reduction in home loan approvals, which impacted growth in Q1FY24.
In a sequential comparison, credit approvals shrank by 20.3 percent in Q1FY24 compared to the preceding quarter, Q4FY23. During Q1FY24, NBFCs sanctioned loans worth Rs 3.51 lakh crore, down from Rs 3.32 lakh crore in Q1FY23. This was also a decrease from the Rs 4.41 lakh crore sanctioned in Q4FY23.
Furthermore, the Q1FY24 sanctions were below the average sanctions of Rs 3.84 lakh crore over the four quarters in FY23, according to reports.
Interest rates pinch
The significant growth observed in Q1FY23 was attributed to a surge in demand after a pandemic-induced slump, but higher interest rates in the financial system have hindered the uptake of home loans. Nevertheless, the growth in unsecured loans and gold loans remained steady on a Y-o-Y basis.
In Q1FY24, the pace of credit sanctions at 5.7 percent Y-o-Y was notably low for the April-June period, particularly when compared to the historical pace, which had consistently exceeded 15 percent Y-o-Y for the past decade.
Other segments
Certain sectors experienced robust growth, including unsecured loans (18.7 percent), gold loans (47.7 percent Y-o-Y), automobile loans (15.1 percent Y-o-Y), and equipment loans (16.3 percent). However, sectors such as commercial vehicle loans (-2.8 percent Y-o-Y), housing loans (-26.6 percent Y-o-Y), property-backed loans, and secured business loans showed negative growth.
In terms of demographic distribution, annualized growth stood at 11.6 percent Y-o-Y in rural areas, 12.4 percent Y-o-Y in semi-urban areas, and 2.2 percent Y-o-Y in urban areas. Sequentially, all three categories exhibited negative growth in Q1FY24 compared to Q4FY23.
