NBFCs will continue to grow at a faster pace, have grown above India's GDP historically: Report

A new report by Mavenark Advisors suggests that Non-Banking Financial Companies (NBFCs) are expanding faster than India's overall economic growth. From FY19 to FY24, credit growth by NBFCs is estimated to have grown by a compounded annual growth rate (CAGR) of 12%. Their assets under management (AUM) have significantly increased from less than Rs. 2,00,000 crore (US$ 23.74 billion) around the year 2000 to Rs. 43,00,000 crore (US$ 510.39 billion) by the end of FY24. This trend is expected to continue in FY25, supported by a rapid revival in the Indian economy and rising consumer demand. Unlike banks, which primarily focus on wholesale lending to large corporates, services, and agriculture sectors, NBFCs have entered retail lending, with 48% of their total credit going to the retail segment, compared to only 34% of total bank credit in FY24.
NBFCs have played a crucial role in driving financial inclusion in India. With strong grassroots connections, they cater to people in rural and semi-urban areas who are either unbanked or underbanked. They also lend to those without formal credit histories, such as workers in the informal sector. This focus on individual borrowers, especially those from low-income or riskier profiles, makes them an important part of the country's financial ecosystem. The report suggests that NBFCs will continue to grow rapidly, playing a critical role in bridging financial access gaps across the country and supporting the government's broader financial inclusion goals.

Disclaimer: This information has been collected through secondary research and IBEF is not responsible for any errors in the same.