The non-banking financial companies sector continues to demonstrate resilience within the Scale-Based Regulations framework.
The sector maintained double-digit credit growth, adequate capital levels and a low delinquency ratio by December, 2023, according to the RBI report ‘Peeling the Layers: A Review of the NBFC Sector in Recent Times’.
Since the introduction of SBR in October 2022, the gross non-performing asset (NPA) ratio has decreased markedly, falling from a range of 4.4 per cent to 10.6 per cent in December 2021 to 2.4 per cent to 6.3 per cent by December 2023.
Though this reflects improved asset quality and risk management in the sector, NBFCs need to remain mindful of the rapidly evolving financial landscape and the assurance functions, including risk management, compliance and internal audit, said the RBI’s bulletin for September. It does not necessarily reflect the views of the central bank.
As of December 2023, NBFCs have demonstrated robust credit growth, adequate capital, and low delinquency ratios, signaling a resilient financial landscape.
Moreover, the extension of Prompt Corrective Action (PCA) norms to government-owned NBFCs is expected to fortify the sector further.
In light of rising risk weights on bank lending, NBFCs are increasingly diversifying their funding sources to reduce dependence on bank borrowings.
The report also highlights robust growth in secured retail credit, particularly in gold loans, vehicle loans and housing loans, alongside continued expansion in the industrial and service sectors.
The RBI has identified several major NBFCs as part of the Upper Layer under the SBR framework. These include prominent names such as LIC Housing Finance, Bajaj Finance, Shriram Finance, Tata Sons, L&T Finance, Indiabulls Housing Finance, Piramal Capital & Housing Finance, Cholamandalam Investment and Finance, Mahindra & Mahindra Financial Services, PNB Housing Finance, Tata Capital Financial Services, Aditya Birla Finance, HDB Financial Services, Muthoot Finance, and Bajaj Housing Finance.
As of now, except for Tata Sons all companies in the Upper Layer List (including Bajaj Housing Finance, Aditya Birla Finance, L&T Finance and even Tata Capital) have compiled or initiated steps to comply with the listing requirement.
