NBFC retail lending to soon match that of banks

MUMBAI: The market share of non-banking financial companies, or NBFCs, is expected to go up by 47% in the next three years, according to a report by ratings firm Crisil. NBFCs that at present have a 26% market share in the non-mortgage lending will see a compounded growth of 20% in the next couple of years.

“After the lull of 2007-08, profitability of NBFCs has returned to peak levels,” said Crisil managing director Rupa Kudwa. “We expect retail lending of NBFCs to touch around Rs 4 lakh crore by 2013, which is close to commercial banking lending,” she added. There are right now over 300 registered NBFCs with the Reserve Bank of India.

Crisil has rated 54 NBFCs among these. The rating agency has looked at NBFCs offering consumer and asset financing. It has, however, not taken into account NBFCs that offer housing loans. NBFCs have raised Rs 17,000 crore in the past three years and the share of financing has also diversified from the traditional vehicle financing to other areas of lending like gold and corporate loans. But concerns remain on the sustainability of this growth.

“The ability of NBFCs to raise capital remains an issue,” said Pawan Agarwal, director of corporate and government ratings, Crisil. Another key concern for the sector remains the issue of securitisation, according to a draft paper which was released recently by the central bank.

The NBFC sector is also closely watching the guidelines on the new banking licences as that could determine the fate of most of these companies . RBI is set to release a draft paper on banking licences by the end of this month.