NBFCs outpace banks in June as cards lose some credit

Mumbai: Non-banking finance companies (NBFCs) led in retail loan growth in June, outpacing even the robust expansion in bank credit, showed latest data from the Reserve Bank of India (RBI).

Retail loan growth by NBFCs at more than 20% year-on-year surpassed the 16% increase recorded by banks in June, lifted by strong demand from segments such as loan against jewellery (69%) and consumer durables (47%). Bank credit to this sector, however, got impacted by the deceleration in outstanding credit card growth to 2% from 7% a year ago, the data showed. The sluggish growth is also because banks have almost vacated the consumer durable finance space.

Overall, non-food credit growth for NBFCs was stronger at 18% year-on-year in June, compared to 14% for banks in the same period.


Aastha Gudwani, economist at Barclays, said NBFC credit growth is highly concentrated, with retail loans comprising the largest portfolio share and reflecting the strongest growth among the major sectors.

"The combination of the largest portfolio weight and the highest growth rate among the major sectors (driven by housing, vehicle, and loans against gold, similar to bank credit trends) means that retail has made the dominant contribution to aggregate NBFC-credit growth," Gudwani said in a report Monday.

Siddharth Rajpurohit, lead analyst, bank and NBFCs, at Systematix Shares & Stocks said non-bank lenders are aggressively lending in the retail space, noting the relatively low risk in credit costs, while banks have turned more cautious in areas like unsecured credit. "There are segments like consumer durables which banks have avoided because of its low ticket nature," said Rajpurohit. "In credit cards too, the number of revolvers of credit has consistently come down which explains the low growth for banks there. On the other hand, NBFCs have aggressively grown even in unsecured segments which explains the strong growth from these companies in the retail segment."