In the December quarter of this financial year, NBFCs left banks far behind in terms of growth of unsecured personal loans. RBI had relaxed the rules related to loans given to NBFCs by banks. This could be the reason for the high growth of unsecured personal loans of NBFCs in the December quarter. RBI's measures of reducing interest rates, liberalizing monetary policy and increasing liquidity may also have a hand in this.
Sharp jump in NBFC's personal loan book
According to data from brokerage firm Nomura, the personal loan book of NBFCs grew by 37 percent in the October-December quarter. In comparison, the growth of the entire system including banks was only 16 percent. The report said that in the December quarter, the unsecured loan of NBFCs grew by 2.6 times, while the system grew only by 1.8 times. This has increased the share of NBFCs in the system-level PL portfolio.
Personal loans may see strong growth in the fourth quarter as well
A sharp rise in the unsecured loan book of NBFCs can be a cause of concern. Earlier, when this happened, RBI had increased the risk weight for loans to NBFCs from banks. Analysts say that the rise in unsecured loans continued in the fourth quarter as well. In February, RBI had reduced the risk weight for loans to NBFCs from banks to the same level as before. This reduced the cost of funds for NBFCs.
RBI has indicated reduction in risk weight
RBI has indicated that if it feels that the asset quality has returned to normal levels, it can bring down the risk weight on unsecured loans to the previous level. The question is whether RBI will regret its decision of relaxing microprudential standards? After bringing down the risk weight to the previous level, NBFCs have shown an aggressive attitude in giving unsecured loans. Even those customers who have a weak financial history get loans from NBFCs.
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Big jump in personal loans of less than Rs 50,000
Analysts have said that once again there has been a jump in loans of size less than Rs 50,000. Earlier, RBI had taken strict steps when pressure was seen in loans of this size. NBFCs are far ahead in this category of loans. However, analysts have also said that the profile of borrowers has improved and lenders have also become more disciplined. However, delinquency rates in personal loans in the first half of FY25 are not good for NBFCs and banks.
