NBFCs' loan growth to ease to 17% in FY25 from 21% in FY24: Jefferies

The loan growth of Indian Non-Banking Financial Companies (NBFCs) and Housing Finance Companies (HFCs) (excluding IFCs) will moderate to 17 per cent in FY25, down from 21 per cent in FY24, stated a report by Jefferies.

The report noted that this moderation is attributed to weaker credit demand due to softer macroeconomic conditions.

It said, "Growth to moderate and stabilize in FY26e at healthy levels. We expect sector loan growth (ex IFC) to moderate to 17 per cent in FY25e (21 per cent FY24) and stabilize near these levels in FY26e."


The report added that reduced lending to unsecured and microfinance loans (MFI), following the Reserve Bank of India's (RBI) guidance, and a cyclical slowdown in segments such as automobiles, has contributed to this moderation.

It added, "Growth moderation has been sharp in unsecured PL, consumer financing and MFI; moderation in other segments was relatively more modest during 1HFY25e."

The report also noted that Asset Under Management (AUM) growth for NBFCs is expected to slow to 20 per cent in FY25, compared to 24 per cent in FY24. However, HFCs may see improved AUM growth, rising to 12-13 per cent in FY26 from 11 per cent in FY24.

The report anticipated that economic activity will improve in FY26, supporting the stabilization of growth across the sector. Over the FY25-27 period, the coverage AUM (excluding IIFL) is projected to grow at a compound annual growth rate (CAGR) of 19 per cent, slightly higher than the 18 per cent expected in FY25.

The growth in loans for Non-Banking Financial Companies (NBFCs) and Housing Finance Companies (HFCs) has slowed to 20 per cent as of September 2024, compared to 22 per cent in March 2024.

The report highlighted that the slowdown has been most pronounced in unsecured personal loans, consumer financing, and MFI loans, while other segments have experienced relatively modest deceleration in growth during the first half of FY25.

Infrastructure finance companies (IFCs), which account for 30 per cent of NBFC/HFC credit, the Asset Under Management (AUM) growth for the sector has eased to 15 per cent in September 2024 from 18 per cent in March 2024.

Incremental growth trends in 2025 are likely to vary by segment. While growth in unsecured loans and MFI loans is expected to remain subdued during the first half of the calendar year, the report added that segments like auto loans and others are likely to stabilize and potentially pick up if macroeconomic conditions improve as anticipated.