NBFCs ramp up commercial loans: CRISIL

Non-banking finance companies (NBFCs) are quickly filling the space left by banks in corporate credit, and their pace of wholesale loan growth annually could be as high as 21 per cent, in the next two years.

Saddled with bad debts, banks are cutting on lending to the corporate sector but NBFCs are lending aggressively to real estate, infrastructure finance, and structured credit space, said CRISIL Ratings in a report. The three, termed ‘wholesale credit’ is seen “growing at a pacy 21 per cent annually till 2020, or 350400 basis points (bps) faster than the individual and MSME (micro, small and medium enterprises) segments. Consequently, its share of non-banks’ overall credit pie would surge to 20 per cent from just 12 per cent in 2014,” CRISIL said.

CRISIL could not give the share of NBFCs in the wholesale credit segment, vis-à-vis banks, but the Reserve Bank of India (RBI) in October last year had said NBFCs were slowly increasing their share in commercial lending space.

NBFCs have increased their market share in credit to business from 2 per cent in 2015-16 to 2.8 per cent in 201617, said the RBI study.

NBFCs disbursed ~840 billion of commercial loans in 2015-16 but the segment rose sharply to ~1.24 trillion in 2016-17, growing the book by 8.8 per cent. CRISIL said stable asset quality in the segment had been achieved because of stringent controls. “The security structure is robust, with a high degree of operational control over escrow cash flows, specifically in real estate exposures. The collateral cover in structured loans tends to be high,” said Krishnan Sitaraman, senior director, CRISIL Ratings.