Non-banking financial companies (NBFCs) in the non-deposit taking systemically important (ND-SI) segment recorded a credit growth of 13% year-on-year (y-o-y) in FY17, as compared to 5.4% for banks, provisional data released by the Reserve Bank of India (RBI) showed.
While private banks grew 17% y-o-y, public sector banks witnessed a growth of 0.6% in FY17, according to the data. The central bank added that NBFCs disbursed Rs 1.24 lakh crore to the commercial sector in FY17, up from Rs 84,000 crore from FY16.
A recent study by RBI found that balance sheet performance of NBFCs has been better than banks on various parameters. “The credit intensity, or credit as a percentage of GDP, of NBFCs-ND-SI has shown a steady increase, reaching 8% in 2017,” it said. NBFCs-ND-SI credit has maintained a steady share in total credit to the commercial sector barring a fall in 2015-16 due to a pickup in bank credit as well as the conversion of Bandhan Financial Services and Infrastructure Development Finance Corporation (IDFC), two major players in the NBFC sector, into universal banks.
“Their share went up sharply in 2016-17 reflecting growing intermediation,” RBI added. The report added that while NBFCs have traditionally funded both the industrial sector and the retail segment, industry has received about two-thirds of the total credit by these companies and the share of retail credit has increased from 3.4% in 2014-15 to 15.6% in 2015-16 and 17.7% in 2016-17. Among NBFCs-ND-SI, credit extension is the main business for loan companies, NBFCs-IFC (infrastructure finance company), NBFCs-MFI (microfinance institutions), and AFCs (asset finance company).
While all these categories of NBFCs posted double-digit growth till 2015-16, they showed divergent patterns in 2016-17. Loan companies and NBFCs-IFC maintained positive credit growth, whereas NBFCs-MFI and AFCs shrank their asset portfolios mainly due to conversion of large NBFCs- MFI into small finance banks during the year.
“AFCs, which mainly lend to finance vehicles and retail loans, were affected by the postponement of purchase decisions by their customers due to uncertainty in the wake of demonetisation,” the report explained.