NBFC loan sanctions up 2% YoY in Q4, rises in investment sector: Report

Growth in sanctions for equipment, commercial vehicles indicates revival of capital investment: Study

Loan sanctions by non-banking finance companies (NBFC) grew 2 per cent year-on-year (YoY) to Rs 4.46 trillion in the fourth quarter of Financial Year 2022-23 (Q4 FY23), said a report on Tuesday.

Sanctions for consumption-oriented areas and housing were tepid, but those for investment activities like commercial vehicles and equipment did better, according to data from Finance Industry Development Council (FIDC) and CRIF. CRIF, a credit bureau, works with FIDC for analysis.

Sanctions by NBFCs expanded 7 per cent in the third quarter ended December 2022 (Q3 FY23) compared to the same period last year. The sanctions in absolute terms were Rs 4.17 trillion in Q3 FY23.

K V Srinivasan, co-chairman of FIDC, said the YoY growth in loan sanctions for equipment (36 per cent) and commercial vehicles (20 per cent) and loan against property (25 per cent) indicate revival of capital investment in the economy. Unsecured business loans--another indicator of economic activity--grew 24 per cent YoY in sanctions.

Personal loan sanctions by NBFCs declined 15 per cent YoY and consumer loans expanded just four per cent YoY. Home loan was still in negative territory with 1.0 per cent YoY reduction.

Srinivasan said housing remains largest in terms of absolute sanction (Rs 87,102 crore) amongst various segments in Q4. But the activity in the housing finance segment was adversely impacted by sharp rise in lending rates and base effect (over Q4 FY22).

FIDC, the NBFC industry’s lobbying group, said in a statement while sanctions in rural areas declined 10 per cent YoY, those in urban areas shrunk by one per cent and semi-urban contracted by five per cent.

Sequentially, all categories showed growth namely in rural (5 per cent), semi-urban (3.0 per cent) and urban (8 per cent), FIDC-CRIF data showed.