Small Finance Banks Eye Moderate Loan Growth Amid New Asset Classes Surge

Small Finance Banks (SFBs) in India are expected to see loan growth moderate to 25-27% in FY25 from 28% in FY24, as per Crisil Ratings. Despite this, robust growth driven by geographical and segmental expansion is anticipated. Challenges include deposit mobilization and costs, with alternatives like securitization being explored.

Small Finance Banks (SFBs) are forecasted to experience a slight moderation in loan growth to 25-27% in FY25, down from 28% in FY24, according to Crisil Ratings.

The agency emphasized that while growth will slow, it remains strong due to segmental and geographical expansion. However, SFBs will face challenges with deposit mobilization and associated costs, prompting a shift towards non-deposit funding avenues.

Asset diversification, particularly into areas like mortgages and small businesses, is expected to fuel substantial growth, while traditional microlending continues to thrive. SFBs will also need to focus on maintaining healthy capital buffers and managing their reliance on bulk deposits.

(With inputs from agencies.)