Fitch Ratings: Large Indian NBFIs Poised to Outperform Amid Economic and Regulatory Challenges

Fitch Ratings has highlighted that large non-bank financial institutions (NBFIs) in India are better positioned to withstand economic and regulatory challenges compared to smaller counterparts. Despite a slowdown in credit growth, with NBFIs' loan growth moderating to 6.6% in FY25, large NBFIs are expected to maintain strong performance due to robust operations and diversified funding sources, including securitisation and offshore borrowing. Smaller NBFIs face challenges due to tighter regulations, concentrated portfolios, and limited access to funding, with rising delinquencies in unsecured lending affecting their profitability. In contrast, large NBFIs are likely to sustain credit growth driven by sectors such as business loans, gold, and housing loans. Regulatory measures, such as higher risk weights on bank lending to NBFIs and stricter rules on microfinance, may weigh on smaller players, while larger NBFIs should benefit from their established networks and funding flexibility. The near-term outlook remains mixed, with a strong long-term growth trajectory for the sector contingent on broader economic stability.

Source: Mint