INDUSTRIES & MARKETS

Non-banking financial
companies
Despite weak macro-economic conditions, Indian economy remains one of
the fastest growing economy in the world

Upward revision in FY25 GDP growth

Trend in real GDP growth QoQ (%)
forecast by most agencies
Increase
/
Decrease
Nomura 5.5% from last
estimate
JP Morgan 6.8% 30 bps

IMF 20 bps

6.5% 50 bps

UBS
Fitch 7.0%

World 7.0%
Bank 6.6% 0 bps

Goldman Sachs 6.5% 30 bps

RBI 7.0% 10 bps

S&P 6.8% 40 bps

1 Source – MoSPI
 FY23 Results: NBFC Industry Snapshot
Balance Sheet

Balance Sheet Size Total Net Advances Total Borrowings1 Shareholders Fund

₹25.7L Crore ₹22.1L Crore ₹17.1L Crore ₹4.6L

18% YoY 17% YoY 21% YoY Crore
19% YoY

Total Income Net interest income Non-Interest Income PAT

Profitability

₹2.9L Crores ₹1.3L Crore ₹0.2L Crore ₹0.6L Crore

22% YoY 22% YoY 31% YoY 39% YoY

Source – Boston Consulting Group 2023 Report

ROA NIM Cost-Income GNPA (%)
Key Ratios

5.4% Increased
2.5% Increased 32.0% Increased 2.9% Reduced by
by 58 bps
by 45 bps YoY by 197 bp YoY 90 bps YoY
YoY

Total Borrowings include Debt Securities

Note: Growth is calculated for FY23 over FY22. Analysis has been made based on 29 NBFCs (10 HFCs, 2 Gold, 3 MFI and 14 Diversified NBFCs)
2
 Annual growth of loans in India from financial year 2019 to 2023, by financial
institution
Annual growth of loans in India FY 2019-2022, by financial institution

Banks NBFCs

16%
14.3%
14%
13%

12%
10.6% 10.3%
Year on year growth

10%

8% 7.6%
6.3%
6% 5.4%
4.6%
4%

2%

0%
FY 2019 FY 2020 FY 2021 FY 2022

3 Source(s): BCG India; Capitaline

 Number of registered non-banking financial companies (NBFC) in India as of 2023,
by category
Number of NBFCs in India 2023, by category

12,000
8799 9459
10,000 Ahmedabad -
8,000 225
6,000
4,000
2,000 507 100 26 27
0
Number of NBFCs

NBFC category

4 Note(s): India; as of October 2023; NBFCs regulated by RBI

Source(s): Reserve Bank of India
Source - Crisil
 Non banking financial companies (NBFCs) credit to GDP ratio from financial year
2013 to 2021
NBFC credit to GDP ratio in India FY 2013-2021

16%

14% 13.7%

12.2% 12.1%
12% 11.5%
NBFC credit to GDP ratio

10% 9.6% 9.6%

8.6% 8.8% 8.9%

8%

6%

4%

2%

0%
FY 2013 FY 2014 FY 2015 FY 2016 FY 2017 FY 2018 FY 2019 FY 2020 FY 2021

5 Description: The NBFC credit to GDP ratio in India has consistently risen and stood at 13.7 percent in the financial year 2021. In the previous financial year it was around 12 percent. Credit intensity of NBFCs is measured by credit to GDP ratio. Read more
Note(s): India
Source(s): Ministry of Finance (India)
 Summary Snapshot (I/II)
• India's GDP grew at 7.2% in FY23, forecasted to grow between 5.3% to 6.5% YoY in FY24
• Most agencies have made upward revision of India's GDP forecast for FY24
• Major BFSI indicators, except insurance, grew at a healthy rate
• RBI hiked repo rate six times in the FY23, aggregating 250 bps to 6.5%
Macro Trends
• NBFCs post highest credit growth (17.3%) in last 5 years
• NIMs inched higher for lenders on account of higher yields and increased by 30 bps for both lenders;
CIR increased marginally
• Profitability improved for NBFCs aided by record disbursals and improved asset quality
• Valuation for NBFCs remained flat in the last 1 year; However, Diversified NBFCs command higher
valuation than other categories
Banks vs NBFCs • Most Banks/NBFCs reported lower GNPA; Credit costs also continue a downward trend

• Absolute profit for the NBFC sector increased 39% YOY in FY23 driven by Diversified (68%) and

Source © 2023 by Boston Consulting Group.

MFI (220%) NBFCs
• Reduction in credit costs (38bps YoY) and higher NIM (37bps YoY) boosting sector profitability
• Diversified (28%) and Micro Finance (33%) NBFCs driving credit growth for the overall sector
(17%)
Key Performance
• Banks' lending to NBFCs is back, with share of bank’s lending to NBFCs ~2x during last 10 years
Indicators
6
 Summary Snapshot (II/II)
• Asset quality of NBFCs is reaching pre-pandemic levels even as they are witnessing a huge jump
in credit demand
• Asset quality improved for all NBFC segments except Gold loan NBFCs in FY23
• Despite few NBFCs opting to cut capital buffer, NBFC sector remains well capitalized to
NPA and
withstand shocks
Risk
Management

• NBFCs diversifying funding resources, product portfolio (sectors) and service models
– Issuance of NCDs by NBFCs almost doubled in FY23 and surpassed the FY20 levels
– Addition of newer products to drive growth

Source © 2023 by Boston Consulting Group.

– Breaking traditional grid-locks with aid from FinTechs
• Digital lenders are increasingly vying for NBFC license
• Post the pandemic, an accelerated shift is witnessed in Digital adoption by NBFCs
Recent
Developments
7
 Number of registrations and cancellations of non banking financial company
(NBFC) licenses in India from financial year 2015 to 2021
Number of registrations and cancellations of NBFC licenses India FY 2015-2021

Registrations Cancellations

2,000
1,851
1,800
Number of registrations and cancellations

1,600

1,400

1,200

1,000

800

600

400 298
215 210 224
169 166
200 105 125 116
28 46 55 44
0
FY 2015 FY 2016 FY 2017 FY 2018 FY 2019 FY 2020 FY 2021

8 Note(s): India; FY 2015 to FY 2021; provisional data

Source(s): Reserve Bank of India
 Value of credit deployed by non-banking financial companies (NBFCs) and housing
finance companies (HFCs) from financial year 2010 to 2021 (in trillion Indian rupees)
Loan deployment value of NBFCs and HFCs India FY 2010-2021

NBFCs HFCs

30
26.98
24.6
25
22.8
Value in trillion Indian rupees

19.6
20

14.8
15 13.2
12.2 12.77
11.63 11.83
10.9 10.4
10 9.3
7.7 8.2
6.8
6 5.6
4.6 4.6
5 3.9
2.5 3
2

0
FY 2010 FY 2011 FY 2012 FY 2013 FY 2014 FY 2015 FY 2016 FY 2017 FY 2018 FY 2019 FY 2020 FY 2021

9 Source(s): EY; FICCI

NBFCs and financial inclusion
 Annual credit growth of micro, small, and medium enterprises (MSMEs) in India from
financial year 2017 to 2021, with estimates up till for financial year 2023
Annual credit growth of MSMEs in India FY 2017-2023

14%
13%
12%
12%

10% 10%
10%
Year-on-year growth

8%
7%
6%
6%

4%
3%

2%

0%
FY 2017 FY 2018 FY 2019 FY 2020 FY 2021 FY 2022* FY 2023*

16 Source(s): BCG India; Crisil

 Number of microfinance non-banking financial companies (NBFC-MFI) in India as of
January 2022, by city
Number of microfinance institutions India 2022, by city

Number of companies
0 2 4 6 8 10 12 14 16 18 20
Chennai 18

New Delhi 15

Mumbai 14

Kolkata 11

Bengaluru 10

Guwahati 7

Ahmedabad 5
City

Bhubaneshwar 4

Kanpur 4

Hyderabad 3

Jaipur 2

Chandigarh 1

Bhopal 1

Patna 1

Thiruvananthapuram 1

17 Source(s): Reserve Bank of India