NBFC assets to grow 25-30% in FY24-25, caution on unsecured loans: Icra

Non-bank lenders are set to report growth of 25-30 per cent in their Assets Under Management (AUMs) in FY24 and FY25, a domestic rating agency said on Thursday.

Icra Ratings, which made the growth estimate for Non-Banking Financial Companies (NBFCs) having AUMs of up to Rs 10,000 crore, said unsecured loans need to be monitored going forward.

"High growth in the past and the expected AUM expansion going forward, shall keep the portfolio seasoning at low levels, especially for the long-tail loans, namely affordable housing and secured business loans," it said in a report.

Its co-group head for financial sector ratings A M Karthik said the agency assessed the performance of about 105 medium and small NBFCs, accounting for about 14 per cent of the NBFC industry AUM as of March this year.

On the asset quality front, the agency said the reported Gross Stage 3 (GS3) of the entities it assessed was manageable at 2.6 per cent in March 2023 as against 4.2 per cent in March 2022.

The same is lower than the levels reported by larger players -- a sample of 39 entities considered for Icra's analysis), driven by write-offs and faster AUM growth, it said.

It said digital lenders in the sample set reported higher loan losses, with the write-offs standing at 9-10 per cent in the last two fiscals.

"Entities in the unsecured loan segments would be required to raise capital in the next 12-18 months to keep their leverage under control," he added.