Lower base: NBFC loan sanctions pick up in Q2, but below last year’s levels

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November 20, 2021 4:15 AM

The Reserve Bank of India’s (RBI's) guidelines on initial public offer (IPO) financing should further restrict LAS growth in the next quarter, FIDC expects.

A data sheet released by industry association Finance Industry Development Council (FIDC) showed that NBFCs sanctioned loans worth Rs 2.17 lakh crore during the quarter ended September 2021, down 9% from the value of sanctions made in Q2FY20.A data sheet released by industry association Finance Industry Development Council (FIDC) showed that NBFCs sanctioned loans worth Rs 2.17 lakh crore during the quarter ended September 2021, down 9% from the value of sanctions made in Q2FY20.

The value of loans sanctioned by non-banking financial companies (NBFCs) rose 17% on a year-on-year (y-o-y) basis in Q2FY22, but remained below the amount of sanctions made in the comparable quarter of FY20. A data sheet released by industry association Finance Industry Development Council (FIDC) showed that NBFCs sanctioned loans worth Rs 2.17 lakh crore during the quarter ended September 2021, down 9% from the value of sanctions made in Q2FY20.

Mahesh Thakkar, director general, FIDC, said that the 17% y-o-y growth in sanctions should be seen in the light of a very low base in Q2FY21. Segments that drove the improvement in sanctions were auto loans (up 40% y-o-y), commercial vehicle loans (up 31%), consumer loans (up 58%) and home loans (up 40%). Barring housing and consumer loans, though, the other two categories saw sanctions shrinking as compared to Q2FY20 — two quarters before the pandemic outbreak in India. The growth in sanctions vis-a-vis Q2FY21 is largely attributable to a lower base. While gold and personal loans saw a pick-up, loans against securities (LAS) contracted 42% y-o-y.

The Reserve Bank of India’s (RBI’s) guidelines on initial public offer (IPO) financing should further restrict LAS growth in the next quarter, FIDC expects.

Thakkar said that while consumption-oriented loans have grown, productive usage loans, such as secured business loans, equipment loans and medium to long term loans have shrunk, signifying that the capex cycle is still in the negative growth territory. “This is not very encouraging as it indicates that the corporate and SME (small and medium enterprises) sectors are not yet confident about investing for future growth,” he said. Rural demand for loans has improved even as compared to FY20, but urban demand remains sluggish, Thakkar added.

The second wave of the pandemic has prolonged the recovery of some asset segments, such as CVs, business loans and microfinance, analysts at Icra said in a recent report. Despite NBFCs’ assets under management (AUMs) shrinking in Q1, Icra maintains the growth outlook at 8-10% for the sector, given the revival in demand, an upturn in macro-economic indicators, and the low base of the last fiscal. “Sustained supply-side constraints, especially in the vehicle segment, could be a growth impediment and would be monitorable in the near term,” the report said.

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