NBFCs To Unleash Its Potential

NBFC sector has grown consistently and has undergone tremendous transformation over the past few years. Yogesh Supekar and Nikita Singh explain why the sector is on a growth trajectory and here to stay for good.

- Yogesh Supekar And Nikita Singh

A midst all the chaos and the uncertainty on the macroeconomic front in India, and especially in the banking sector, the non-banking finance company (NBFC) sector is one sector that has managed to deliver consistent growth year-on-year.

If one considers the current government’s goal of rapidly improving financial inclusion in India, one will immediately realise the importance of NBFC sector and the crucial role it plays in complementing the banking sector in reaching out credit to the un-banked sections of society

Indeed, NBFCs form an integral part of not only Indian financial system, but also the Indian economy.

The NBFC sector in India has undergone tremendous transformation over the past few years and has been able to deliver consistent year-on-year growth. NBFCs have played an important role in infrastructure development in India and has provided support for the economically weaker sections.

NBFCs have especially contributed handsomely to the growth in advances in micro, small and medium enterprises (MSMEs), which has by far been the biggest achievement of the sector.

NBFCs recently have improved their performance on several metrics, even as the banking sector struggled owing to the issue of non-performing assets.

Based on the financial stability report (FSR) of the Reserve Bank of India (RBI), the NBFC loans expanded 16.6 per cent in FY16, reflecting a growth twice as fast as the 8.8 per cent credit growth logged by the banking sector at the aggregate level.

The sector has grown at a compounded annual growth of almost 18 per cent over the last few years and is expected to maintain similar growth momentum in the coming years.