Indian non-bank lenders' profitability to moderate in next 12-18 months, Moody's Ratings says

Fusion Finance

14/05/2024 16:51

BENGALURU, May 14 (Reuters) - Indian non-banking
financial companies (NBFC) will see some moderation in
profitability in the next 12 to 18 months due to higher funding
costs, rating agency Moody's said in a report on Tuesday.
    In November, India's central bank asked banks to set aside
additional capital against loans to NBFCs, making borrowing from
banks more expensive for non-bank lenders. 
    The Reserve Bank of India also increased the capital
requirements for unsecured loans for both banks and non-bank
lenders.
    Indian non-bank lenders have reported healthy loan growth in
recent quarters due to strong credit demand, especially in the
unsecured lending space. 
    But as unsecured loans mature, Moody's expects the sector's
credit costs, or loan-loss provisions as a portion of gross
loans, to increase from cyclically low levels.
    It also expects some NBFCs to reduce unsecured lending and
increase secured lending after the central bank's November
order, and the non-performing asset ratios for non-banks to
remain below pre-pandemic levels.
    Loans at NBFCs would grow about 15% in the next 12-18
months, Moody's Ratings said. 
    

 (Reporting by Nishit Navin in Bengaluru; Editing by Shinjini
Ganguli)
 ((Nishit.Navin@thomsonreuters.com;))