Date: 21st September, 2022
Location: Ahmedabad

1. The press briefing of Finance Industry Development Council (FIDC) under the chairmanship of prominent industry veteran Mr. Ramesh Iyer (Chairman, FIDC & V C & M D, Mahindra Finance) along with Mr. Umesh Revankar, Co-Chairman, FIDC and VC & M D, Shriram Transport Finance Co. Ltd. & Mr. Kamlesh Gandhi, Co-Chairman, FIDC and CMD, MAS Financial Services Ltd. and other senior Directors of FIDC was held in Ahmedabad today.
2. The Council deliberated on various mandates of FIDC and changing landscapes, emerging trends and opportunities for NBFCs. The Council noted that the sector has successfully navigated the unprecedented crisis of Covid-19 pandemic, once again proving the inherent strength and resilience to bounce back from challenging environment. Post pandemic, the industry is expecting a surge in demand, owing to the rapid urbanization and growing need of the borrower. Moreover, with RBI and Govt. of India, giving special impetus to MSMEs and the small businesses, future seems to be bright for the sector.

The Council further briefed on the Indian market for NBFCs and stated that:

  • Non-banking financial companies (NBFCs) are rapidly gaining prominence as intermediaries in the retail finance space.
  • Non-banking financial businesses (NBFCs) are expected to demonstrate faster growth in 2022, in line with the improvement in the economy, as well as a stronger balance sheet, higher provisions, and improved capital positions.
  • According to India Ratings and Research, NBFCs would maintain loan growth of around 14 per cent year-on-year in the next fiscal wherein growth in the current fiscal is expected at about 7 to 8 per cent.
  • NBFCs are leading the retail industry by disbursing the highest number of loans. NBFCs disbursed 12 crores of loans from April 2021- March 2022 and registered a 64 per cent growth from April 2020 March 2021.
  • According to CRISIL Ratings, vehicle finance, which constitutes nearly half of the assets for NBFCs, will grow at 11-13 per cent in FY23, as against 3-4 per cent in FY22 and FY21.
  • NBFCs finance more than 80% of equipment leasing and hire purchase activities in India.
  • The public funds of NBFCs increased from US$ 278.23 billion in 2016 to US$ 470.74 billion in 2020 at a CAGR of 14.04%.
  • NBFCs continued to play a key role to provide credit to the retail, services and agriculture sectors.
  • SBI along with the other leading public sector banks as well as various private sector banks have signed co-lending agreements with NBFCs, including mid-sized NBFCs. The co-lending is expected to be a major growth driver for the NBFC industry and it will increase the reach of Banks and NBFCs to cater larger segment of borrowers.
  • Products such as loans against property, housing loans and vehicle finance could witness a higher demand than personal and unsecured business loans which saw a higher demand during the pandemic.
  • In July 2021, Rajya Sabha approved the Factoring Regulation (Amendment) Bill, 2020, enabling around 9000 NBFCs to participate in the factoring market. This will benefit the US$ 6 billion factoring sector.

The Council further briefed on Global Trends in lending business and stated that:

  • The global lending market is expected to grow from $7,070.08 billion in 2021 to $7,833.88 billion in 2022 at a compound annual growth rate (CAGR) of 10.8%. The market is expected to grow to $11,285.05 billion in 2026 at a compound annual growth rate (CAGR) of 9.6%.
  • Lenders are adopting digitization solutions to modernize their commercial lending business. The APAC Digital Lending Market is expected to be the fastest-growing market owing to the rapid economic developments, globalization, digitalization, and the increased proliferation of smartphones.
  • Participation lending, also known as syndicated lending, is gaining prominence as it reduces risks associated with lending large capital.

Among the key challenges, FIDC stressed on the need to protect the unique character of the NBFC model when it comes to harmonization of regulatory norms with banks and other FIs. Harmonization has to be comprehensive so as to include taxation and recovery related norms in addition to the RBI regulations. Further, considering the high vulnerability of small borrowers including MSMEs, there is a strong case for having differential prudential norms for them.

Finance Industry Development Council (FIDC) is a Representative Body of Asset and Loan Financing of the NBFCs registered with the Reserve Bank of India. FIDC was formed 18 years ago and their endeavor is to contribute for development of the non-banking financial sector in India by promoting self-regulation, compliance and governance among members and to act as a bridge between lending NBFCs and the regulators.

FIDC firmly believes that an enabling policy and regulatory support to the sector will play an important role in NBFCs being catalyst in bringing about financial inclusion, vital to the economic development of the country.
We look forward to an immediate positive response and are confident that we are in the process of a long and beneficial relationship.

Thanking you,

Yours Faithfully,