Retail loan disbursements by non-bank lenders will grow by 19-22 per cent this fiscal, with the housing finance segment alone needing up to Rs 286 billion in capital over the next three years, domestic ratings agency Icra said today.
Retail credit growth accelerated to 19.9 per cent in 2015-16 as against 14.8 per cent in the year-ago period, it said.
“ICRA expects NBFC retail credit to grow by 19-22 per cent, buoyed by improving prospects of the CV segment, gold loan and passenger vehicle segments,” its Co-Head for financial sector ratings Karthik Srinivasan said.
He said segments such as microfinance and mortgage are likely to exhibit healthy double digit growth, while tractors and construction equipments could register modest revival in the latter part of the year.
With the NPA-saddled banks concentrating on the retail segment, competitive pressures on the non-bank lenders are bound to increase, which can lead to a 0.10-0.15 per cent decline in spreads for housing finance companies (HFC), it said.
NBFCs’ niche positioning, differentiated product offering, good market knowledge and large customer outreach would help them fight competitive pressures, it said.
On the capitalisation front, Icra said the ratio of net worth to managed assets for retail-focussed NBFCs stood at 15.4 per cent as on March 31, 2016.
After accounting for the credit growth and assuming a dip in internal accruals to 10 per cent, the ratio will still be over 15 per cent by the end of the next fiscal.
Housing finance companies witnessed a growth of 19 per cent in outstanding credit last fiscal as against 18 per cent in the previous financial year.
The growth was led largely by the affordable housing sector, which grew at a faster clip of 28 per cent, it said.
Given this performance, the HFCs alone will require external capital of Rs 186-286 billion in the next three years, which is between 30 and 50 per cent of the existing net worth, it said.
On the asset quality front, Icra said the 90+ day delinquencies moderated to 5.4 per cent as of March 2016 as compared to 5.7-5.8 per cent in the previous 2-3 quarters.
The banking system continues to be the primary source of funding for the retail-focussed NBFCs, accounting for close to 42 per cent of the liabilities, followed by non convertible debentures at 34 per cent and commercial paper at 11 per cent.