• About Us
  • Contact Us
Saturday, February 4, 2023
  • Login
  • Register
B2B Infomedia
No Result
View All Result
  • Home
  • Fintech
    Credit card numbers continue to slip after RBI’s deactivation order

    Digital economy push offers hope for multiple players: Mastercard

    PayU reports over 50% jump in revenue, clocks net profit of Rs 126 crore

    Paytm Payments Bank gets final RBI nod to operate as Bharat Bill Payment Operating Unit

    Indian Bank to hold vostro A/cs of 3 Sri Lankan banks

    Indian Bank expands digital offerings under ‘Project WAVE’ initiative

    India records over 23 billion digital payments worth Rs 38.3 lakh crore in Q3

    Cabinet approves promotional incentives worth Rs 2,600 crore for Rupay debit cards, low value UPI transactions

    RBI response sought on PIL seeking uniform banking code for forex transactions

    Reserve Bank of India puts on hold NUE licensing

    Fresh KYC process can be done through video, says RBI

    Fresh KYC process can be done through video, says RBI

  • BFSI
    SBI says further financing to Adani projects to be evaluated on merit

    SBI says further financing to Adani projects to be evaluated on merit

    Bank of Baroda says reduced exposure to Adani Group in two years, no concern on asset quality

    Bank of Baroda says reduced exposure to Adani Group in two years, no concern on asset quality

    Our loans to Adani Group are secure: JK Bank

    Our loans to Adani Group are secure: JK Bank

    RBI response sought on PIL seeking uniform banking code for forex transactions

    Banking sector remains resilient and stable: RBI

    SBI sees 14%-15% corporate credit growth in FY23

    SBI, BoB say Adani exposure within limits, payments on track

    SBI sees 14%-15% corporate credit growth in FY23

    India’s largest bank SBI has $2.6 billion of loans to Adani Group companies

  • Education
    Increase in SC, ST and OBC students enrolment in higher education institutions: AISHE 2020-21

    Increase in SC, ST and OBC students enrolment in higher education institutions: AISHE 2020-21

    AISHE 2020-21: Enrolment of Muslim students for higher education decreases to 4.6%

    AISHE 2020-21: Enrolment of Muslim students for higher education decreases to 4.6%

    IIM Raipur introduces executive certificate programme for Strategic Chief Marketing officers

    IGNOU launches PG diploma Journalism; course available in three languages

    UPCON and Jadooz to set up edutainment centres called ‘Magic Rooms’ in rural Uttar Pradesh

    School dropout rate declines, gender parity improves: Economic Survey

    Entry of foreign varsities in India will lead to healthy competition: Private Universities’ VCs

    Gender gap in undergraduate programmes widens, gains of last few years lost to pandemic: AISHE Report

    Nearly 50 top institutes without chairpersons; 10 waiting for over 8 years

    Nearly 50 top institutes without chairpersons; 10 waiting for over 8 years

  • Enterprise
    Bank of Baroda says reduced exposure to Adani Group in two years, no concern on asset quality

    Bank of Baroda says reduced exposure to Adani Group in two years, no concern on asset quality

    Our loans to Adani Group are secure: JK Bank

    Our loans to Adani Group are secure: JK Bank

    SBI sees 14%-15% corporate credit growth in FY23

    SBI, BoB say Adani exposure within limits, payments on track

    SBI sees 14%-15% corporate credit growth in FY23

    India’s largest bank SBI has $2.6 billion of loans to Adani Group companies

    Tata Sons looks to shed its ‘Upper Layer NBFC’ tag

    Tata Sons looks to shed its ‘Upper Layer NBFC’ tag

    Most public banks continue to reel under weak assets even as private counterparts thrive

    UP seeing fast increase in new borrowers: Transunion Cibil

  • Technology
    Web Werks – Iron Mountain JV launches its First Greenfield Data Center in Mumbai

    Web Werks – Iron Mountain JV launches its First Greenfield Data Center in Mumbai

    New Course by IITs: BTech in Computational Engineering

    New Course by IITs: BTech in Computational Engineering

    Niti Aayog’s AIM, CBSE, Intel India collaborate to bring change in education sector

    Niti Aayog’s AIM, CBSE, Intel India collaborate to bring change in education sector

    Indian Bank to hold vostro A/cs of 3 Sri Lankan banks

    Indian Bank expands digital offerings under ‘Project WAVE’ initiative

    India records over 23 billion digital payments worth Rs 38.3 lakh crore in Q3

    Cabinet approves promotional incentives worth Rs 2,600 crore for Rupay debit cards, low value UPI transactions

    Amid layoffs, American tech giants recruit less from IITs in 2022-23 placement season

    Amid layoffs, American tech giants recruit less from IITs in 2022-23 placement season

  • Events
    • Upcoming Events
    • Past Events
  • Home
  • Fintech
    Credit card numbers continue to slip after RBI’s deactivation order

    Digital economy push offers hope for multiple players: Mastercard

    PayU reports over 50% jump in revenue, clocks net profit of Rs 126 crore

    Paytm Payments Bank gets final RBI nod to operate as Bharat Bill Payment Operating Unit

    Indian Bank to hold vostro A/cs of 3 Sri Lankan banks

    Indian Bank expands digital offerings under ‘Project WAVE’ initiative

    India records over 23 billion digital payments worth Rs 38.3 lakh crore in Q3

    Cabinet approves promotional incentives worth Rs 2,600 crore for Rupay debit cards, low value UPI transactions

    RBI response sought on PIL seeking uniform banking code for forex transactions

    Reserve Bank of India puts on hold NUE licensing

    Fresh KYC process can be done through video, says RBI

    Fresh KYC process can be done through video, says RBI

  • BFSI
    SBI says further financing to Adani projects to be evaluated on merit

    SBI says further financing to Adani projects to be evaluated on merit

    Bank of Baroda says reduced exposure to Adani Group in two years, no concern on asset quality

    Bank of Baroda says reduced exposure to Adani Group in two years, no concern on asset quality

    Our loans to Adani Group are secure: JK Bank

    Our loans to Adani Group are secure: JK Bank

    RBI response sought on PIL seeking uniform banking code for forex transactions

    Banking sector remains resilient and stable: RBI

    SBI sees 14%-15% corporate credit growth in FY23

    SBI, BoB say Adani exposure within limits, payments on track

    SBI sees 14%-15% corporate credit growth in FY23

    India’s largest bank SBI has $2.6 billion of loans to Adani Group companies

  • Education
    Increase in SC, ST and OBC students enrolment in higher education institutions: AISHE 2020-21

    Increase in SC, ST and OBC students enrolment in higher education institutions: AISHE 2020-21

    AISHE 2020-21: Enrolment of Muslim students for higher education decreases to 4.6%

    AISHE 2020-21: Enrolment of Muslim students for higher education decreases to 4.6%

    IIM Raipur introduces executive certificate programme for Strategic Chief Marketing officers

    IGNOU launches PG diploma Journalism; course available in three languages

    UPCON and Jadooz to set up edutainment centres called ‘Magic Rooms’ in rural Uttar Pradesh

    School dropout rate declines, gender parity improves: Economic Survey

    Entry of foreign varsities in India will lead to healthy competition: Private Universities’ VCs

    Gender gap in undergraduate programmes widens, gains of last few years lost to pandemic: AISHE Report

    Nearly 50 top institutes without chairpersons; 10 waiting for over 8 years

    Nearly 50 top institutes without chairpersons; 10 waiting for over 8 years

  • Enterprise
    Bank of Baroda says reduced exposure to Adani Group in two years, no concern on asset quality

    Bank of Baroda says reduced exposure to Adani Group in two years, no concern on asset quality

    Our loans to Adani Group are secure: JK Bank

    Our loans to Adani Group are secure: JK Bank

    SBI sees 14%-15% corporate credit growth in FY23

    SBI, BoB say Adani exposure within limits, payments on track

    SBI sees 14%-15% corporate credit growth in FY23

    India’s largest bank SBI has $2.6 billion of loans to Adani Group companies

    Tata Sons looks to shed its ‘Upper Layer NBFC’ tag

    Tata Sons looks to shed its ‘Upper Layer NBFC’ tag

    Most public banks continue to reel under weak assets even as private counterparts thrive

    UP seeing fast increase in new borrowers: Transunion Cibil

  • Technology
    Web Werks – Iron Mountain JV launches its First Greenfield Data Center in Mumbai

    Web Werks – Iron Mountain JV launches its First Greenfield Data Center in Mumbai

    New Course by IITs: BTech in Computational Engineering

    New Course by IITs: BTech in Computational Engineering

    Niti Aayog’s AIM, CBSE, Intel India collaborate to bring change in education sector

    Niti Aayog’s AIM, CBSE, Intel India collaborate to bring change in education sector

    Indian Bank to hold vostro A/cs of 3 Sri Lankan banks

    Indian Bank expands digital offerings under ‘Project WAVE’ initiative

    India records over 23 billion digital payments worth Rs 38.3 lakh crore in Q3

    Cabinet approves promotional incentives worth Rs 2,600 crore for Rupay debit cards, low value UPI transactions

    Amid layoffs, American tech giants recruit less from IITs in 2022-23 placement season

    Amid layoffs, American tech giants recruit less from IITs in 2022-23 placement season

  • Events
    • Upcoming Events
    • Past Events
No Result
View All Result
B2B Infomedia
No Result
View All Result
Home BFSI

NBFCs turn to newer asset classes in quest for returns

Focus shifts from home and vehicle finance, the traditional mainstays, to unsecured and MSME loans in quest for returns. Now, stronger balance sheets with higher provisioning and lower leverage, receding asset-quality concerns, and steadily normalising funding access provide NBFCs a strong foundation to boost growth as credit demand piggybacks the ongoing economic rebound.

Prashant Dwivedi by Prashant Dwivedi
December 29, 2022
in BFSI, Enterprise
A A
0
Leading NBFCs offer up to 8.84% to attract retail savings
0
SHARES
1
VIEWS
Share on FacebookShare on Twitter

Non-banking financial companies (NBFCs) have started realigning portfolio strategies for better risk-adjusted returns, with focus on unsecured loans and micro, small and medium enterprise (MSME) finance, anticipating a surge in their cost of funds amid rising interest rates and reduced competitiveness in traditional segments such as home and new vehicle loans due to intensifying competition from banks.

Used vehicle loans, though, would continue to be a key business segment for NBFCs given the higher yields in this space and because it is not a focus area for banks.

In the past few years, NBFCs have navigated multiple challenges, exacerbated by the Covid-19 pandemic.

Now, stronger balance sheets with higher provisioning and lower leverage, receding asset-quality concerns, and steadily normalising funding access provide NBFCs a strong foundation to boost growth as credit demand piggybacks the ongoing economic rebound.

The portfolio realignment is visible already.

As a percentage of overall disbursements for NBFCs, in the first half of this fiscal, the share of unsecured loans increased to ~35% from ~ 31% last fiscal and ~24% in the previous one. Disbursement of unsecured loans had doubled on-year last fiscal and rose almost 50% in the first half of this fiscal.

From an assets under management (AUM) perspective, unsecured loans are seen growing 20-25% this fiscal — higher than in the past two fiscals — to near the pre-pandemic level. The relatively lower growth in AUM for unsecured loans vis-à-vis disbursements is because these are shorter tenure loans and run off quicker from the balance sheet as compared to home loans or vehicle loans.

Disbursements in MSME finance have also increased substantially, surging ~55% on-year last fiscal and maintaining momentum in the first half of this fiscal, following a slowdown in the past 3-4 years. In fact, disbursements had declined on-year in fiscal 2021 on account of the pandemic induced slowdown.

In short, therefore, AUM uptick in these segments will drive growth for NBFCs going forward.

As large NBFCs turn towards non-traditional segments to enhance yields, we may also see more partnerships, such as co-lending with emerging NBFCs focusing on specific asset classes, especially unsecured loans. This allows the large NBFCs to expand to newer domains in a more cost-efficient manner while reducing time-to-market; for emerging ones, it supports capital-efficient AUM growth.

This doesn’t imply the traditional segments will not grow.

In home loans, which is the biggest segment, making up 40-45% of the NBFC AUM, structural factors driving end-user housing demand are intact despite the impact of rising real estate prices and interest rates. That should drive 13-15% growth in the segment next fiscal.

That said, banks are quite competitive in home loans and HFCs could keep losing market share to banks amid intense competition on interest rates, especially in the urban and the formal salaried segments. As such, banking sector growth is expected to be buoyant going forward, with the share of retail in the advances expected to rise.

Rising rates will also lift the borrowing cost of NBFCs and lower their competitiveness versus banks, which have access to lower-cost funds. NBFCs are expected to maintain their hold in the self-employed professionals and affordable housing segments, though.

Vehicle finance, the second-largest segment (20-25% of NBFC AUM), will grow 13-14% next fiscal compared with an estimated ~12% this fiscal, on the back of solid underlying-asset sales. Strong pent-up demand and new launches will continue to drive car and utility vehicle sales. The ongoing rebound in economic activity, demand for fleet replacement, and focus on last-mile connectivity will support commercial vehicle sales.

In the new-vehicle finance segment, especially cars, interest-rate sensitivity of borrowers is high, so competition from banks remains tough given their ability to offer finer pricing. Consequently, NBFCs will likely capitalise on their core strengths of last-mile connectivity, customer relationships, and innovativeness and strong understanding of micro markets to sharpen focus on used-vehicle financing, which offers higher yields and better profitability from a risk-adjusted returns perspective.

While all segments will witness a strong rebound, real estate finance may continue to be catered via the Alternate Investment Fund route. Some NBFCs may look at a calibrated re-alignment of exposure to construction finance for large developers, lease rental discounting loans, and last-mile financing as these carry relatively lesser risk and potential for higher returns.

To sum up, NBFCs are well placed today to capitalise on the opportunities ahead. The nimbleness of the sector should allow for a quick recalibration of portfolio strategies and ensure sustained growth, though higher-than-expected inflation and interest rates remain key monitorables.

(The author is senior director & deputy chief ratings officer at CRISIL Ratings)

0Like
0Dislike
50% LikesVS
50% Dislikes
Source: Economic Times
Tags: bfsiCRISIL RatingsMSMENBFCs
Previous Post

Reliance Foundation announces scholarships on Dhirubhai Ambani’s 90th birth anniversary

Next Post

Here’s what a Paytm report tells us about India’s UPI journey in 2022

Prashant Dwivedi

Prashant Dwivedi

Related Posts

SBI says further financing to Adani projects to be evaluated on merit
Enterprise

SBI says further financing to Adani projects to be evaluated on merit

February 4, 2023
Bank of Baroda says reduced exposure to Adani Group in two years, no concern on asset quality
BFSI

Bank of Baroda says reduced exposure to Adani Group in two years, no concern on asset quality

February 4, 2023
Our loans to Adani Group are secure: JK Bank
BFSI

Our loans to Adani Group are secure: JK Bank

February 4, 2023
Next Post
India records over 23 billion digital payments worth Rs 38.3 lakh crore in Q3

Here's what a Paytm report tells us about India's UPI journey in 2022

Leave a Reply Cancel reply

Your email address will not be published. Required fields are marked *

14th NBFC & FINTECH CONCLAVE & AWARDS 2023
Subscribe to our Newsletter
johnsmith@example.com

Recent News

SBI says further financing to Adani projects to be evaluated on merit

SBI says further financing to Adani projects to be evaluated on merit

February 4, 2023
Bank of Baroda says reduced exposure to Adani Group in two years, no concern on asset quality

Bank of Baroda says reduced exposure to Adani Group in two years, no concern on asset quality

February 4, 2023
Our loans to Adani Group are secure: JK Bank

Our loans to Adani Group are secure: JK Bank

February 4, 2023
RBI response sought on PIL seeking uniform banking code for forex transactions

Banking sector remains resilient and stable: RBI

February 4, 2023
B2B Infomedia

Be To Be Infomedia Pvt. Ltd. represents the inovative platfrom to the clients and widely recognised as one of the ponier networking platfrom with the team of young, creative, dynamic & dedicated professionals.

Quick Links

  • Home
  • About Us
  • Contact Us
  • Privacy Policy
  • Refund Policy
  • Terms and Conditions

All News

  • BFSI
  • Edtech
  • Education
  • Enterprise
  • Financial Inclusion
  • Fintech
  • Pharma
  • Startup
  • Technology
Subscribe to our Newsletter
johnsmith@example.com
  • About Us
  • Contact Us

© 2022 b2binfomedia - Designed & Maintain by hscreativehub.com.

No Result
View All Result
  • Home
  • About Us
  • Upcoming Events
  • Fintech
  • BFSI
  • Education
  • Technology
  • Startup
  • Enterprise
  • Pharma
  • Contact Us
  • Login
  • Sign Up

© 2022 b2binfomedia - Designed & Maintain by hscreativehub.com.

Welcome Back!

Sign In with Google
OR

Login to your account below

Forgotten Password? Sign Up

Create New Account!

Sign Up with Google
OR

Fill the forms below to register

All fields are required. Log In

Retrieve your password

Please enter your username or email address to reset your password.

Log In