The growth rate of NBFC unsecured loans is twice that of retail credit.
NBFC Unsecured Loans: Non-Banking Financial Companies (NBFCs) in India have experienced a significant rise in their unsecured loan portfolios, which grew at a compound annual growth rate (CAGR) of nearly 32% from FY2017 to FY2024. According to a joint study by Assocham and ICRA, this growth rate is twice as fast as that of secured retail loans, including those for cars, homes, gold, and real estate.
The investigation reveals that the share of unsecured retail loans in the total NBFC lending portfolio has increased to 14%. If large infrastructure project loans are excluded, the proportion of unsecured loans in NBFC portfolios would rise from 5% in March 2016 to 23%.
The rapid expansion of unsecured loans includes microfinance, personal, and consumer loans. This segment has driven the overall growth in retail loans to an 18% CAGR during FY2017–2024.
Furthermore, NBFCs have bolstered their market position in lending overall, achieving a robust CAGR of approximately 15% between FY2017 and FY2024, outpacing the 11% CAGR recorded by banks over the same period. This impressive growth highlights the critical role of NBFCs in meeting the increasing demand for unsecured credit.
“NBFCs register a robust expansion in the last two financial years boosting their overall financial ecosystem. However, their improved systemic importance and higher interconnectedness, especially with the banking sector have led to increased regulatory oversight and actions in the past said Karthik Srinivasan, senior VP, ICRA.”
The period from FY2017 to FY2024 has been transformative for NBFCs in India, marked by an unprecedented surge in their unsecured loan portfolios. This growth, driven by increased consumer demand, microfinance expansion, technological advancements, and a higher risk appetite, has positioned NBFCs as key players in the retail lending market.