NBFCs outpace banks in June as cards lose some credit
NBFCs outpaced banks in retail lending growth in June, with loans rising over 20% year-on-year compared with 16% for banks. Growth was driven by jewellery and consumer durable loans as banks remained cautious in unsecured and low-ticket lending segments.
Mumbai: Non-banking finance companies (NBFCs) showed stronger retail loan growth in June, surpassing banks despite the overall modest expansion in credit, according to data from the Reserve Bank of India (RBI). The retail loan growth by NBFCs, at over 20% year-on-year, exceeded the 16% increase recorded by banks in June, driven by robust demand in sectors like loan against jewellery (69%) and consumer durables (47%).
Bank credit in these sectors, however, suffered due to a slowdown in credit card growth, which fell from 7% a year ago to just 2%. The decline in credit card usage is also attributed to banks' withdrawal from the consumer durable finance space. Overall, non-food credit growth for NBFCs was notably stronger at 18% year-on-year, compared to 14% for banks in the same period.
Aastha Gudwani, an economist at Barclays, highlighted that the credit growth of NBFCs is highly concentrated, with retail loans comprising the largest portion of their portfolio and exhibiting the highest growth among major sectors. The dominant contribution to NBFC credit growth, according to Gudwani, came from retail loans, driven by sectors such as housing, vehicle loans, and loans against gold, mirroring the trends seen in bank credit.
Siddharth Rajpurohit, a lead analyst at Systematix Shares & Stocks, noted that non-bank lenders are aggressively expanding in the retail sector, benefiting from relatively low risk in credit costs. In contrast, banks have become more cautious in areas like unsecured credit, avoiding segments such as consumer durables due to the low ticket nature.
The decline in credit card revolvers also played a role in the lower growth for banks in that segment. NBFCs, on the other hand, have shown significant growth in unsecured segments, contributing to the robust retail credit growth they experienced.
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