Big Players, Big Edge: Fitch Flags Business Models as Key to NBFC Credit Strength

India’s non-bank financial companies (NBFCs) are seeing their credit profiles increasingly shaped by the strength of their business models and operational scale, according to Fitch Ratings’ latest sectoral review. The agency highlights that larger NBFCs are better positioned to weather economic and regulatory headwinds, thanks to diversified funding channels, robust internal capital generation, and established lending franchises.

 

Key highlights from the report:

 

Loan market share of 17 major NBFCs surged to 38% by September 2024, up from 30% in March 2022, underscoring consolidation in the sector.
 

Credit growth slowed to 6.6% (excluding housing finance companies) between March and September 2024, reflecting tighter bank funding and regulatory curbs.
 

Microfinance and unsecured lending segments face rising delinquencies, with the 90-day past-due ratio climbing to 3.8% in September 2024.
 

Larger NBFCs are expected to sustain mid-to-high-teen credit growth, supported by access to offshore borrowing and securitisation.
 

Smaller players may struggle due to concentrated portfolios, limited funding access, and stricter RBI oversight.

 

Fitch also noted that secured lending segments like gold and housing loans remain resilient, while business loans against property and commercial vehicle financing may see softer demand. Despite elevated funding costs, mutual fund investments in NBFC debt rose 51% year-on-year in November 2024, offering some relief.

 

The outlook remains mixed: scale and strategic agility will define survival and success in India’s evolving NBFC landscape.

 

Sources: Fitch Ratings, DD India, Indian Express