R Srinivasan
Vice President Sector Head - Financial Services Ratings, ICRA Ltd
R Srinivasan
Vice President Sector Head - Financial Services Ratings, ICRA Ltd
Paradigm shift towards unsecured loan segment, a key driver of overall NBFC growth
Unsecured loans of NBFCs (personal loans, consumption loans, microfinance and unsecured SME loans) have witnessed a robust pace of growth in the recent past, supported by digitization via the India Stack and access to commensurate borrower-level data. Supported by these factors, co-lending and partnership-models based lending also played a key role as larger NBFCs and banks looked to grow their retail books and diversify by adding new borrowers and venturing into newer asset segments. While loan losses in this segment are expected to be elevated at 4-6% on a steady-state basis, this segment can generate adequate risk-adjusted returns at a commensurate scale. It is, however, crucial for the lenders to continue to maintain high underwriting thresholds for good quality growth going forward. ICRA expects this segment, with an outstanding AUM of Rs. 5.1 trillion as of March 2023, to expand by 26-28% in FY2024.
