NBFC Credit Growth to Decelerate: Challenges on the Horizon

The growth in credit among non-banking financial companies (NBFCs) is projected to decelerate to 13-15% in FY2025 and FY2026, down from 17% in previous years. Despite robust retail asset contributions, concerns about borrower overleveraging and rising delinquencies in unsecured loans may impact profitability.

Non-banking financial companies (NBFCs) in India are expected to experience a slowdown in credit growth, with projections dropping to 13-15% for the financial years 2025 and 2026. This forecast, provided by rating agency ICRA, indicates a dip from the 17% growth observed in the last two fiscal years.

As of December 2024, the overall credit from NBFCs was about Rs 52 trillion, anticipated to exceed Rs 60 trillion by FY2026. Retail assets, which comprised 58% of the total NBFC credit, have driven growth, although they are expected to grow at a slower pace due to borrower overleveraging concerns.

Rising delinquencies in segments like microfinance and unsecured business loans pose further challenges. While regulatory measures may impact short-term growth, they are seen as beneficial in the long run. Despite competitive pressures, the sector remains broadly stable with adequate liquidity.

(With inputs from agencies.)