NBFC loan sanctions rise 12% in Q1FY25, home and auto loans drive growth

Satisfactory monsoon, soft rates to support growth in H2

The loan sanctions by non-banking finance companies (NBFCs) in the country rose by 12 per cent year-on-year (Y-o-Y) in the first quarter of the current financial year (Q1FY25) with robust growth in segments like home, auto, and personal credit.

Sequentially, however, loan sanctions shrunk by 11 per cent over the quarter ended March 2024 (Q4FY24), given the seasonality of business, according to the Finance Industry Development Council (FIDC).

FIDC data showed that in absolute terms, the finance companies sanctioned loans worth Rs 5.08 trillion in the April-June 2024 period, up from Rs 4.54 trillion a year ago (Q1FY24). FIDC is the industry lobby group of finance companies.

Construction equipment loans showed a negative growth trend. By and large, most of the significant categories showed positive growth Y-o-Y which is encouraging, FIDC said in a statement.

The gold loan sanctions were up 26 per cent to Rs 79,217 crore in Q2FY25 from Rs 62,834 crore in Q1FY24. The sanctions on personal loans grew 12 per cent Y-o-Y to Rs 71,306 crore from Rs 63,494 crore in Q1FY24, FIDC said.

The loan sanctions in the housing segment were Rs 50,826 crore in Q1FY25, up from Rs 47,084 crore in Q1FY24. Auto loan sanctions were Rs 25,022 crore, up from Rs 22,823 crore in the year-ago period. The consumer loan sanctions too grew to Rs 34,466 crore in Q1FY25 from Rs 29,885 crore in Q1FY24.

K V Srinivasan, co-chairman, FIDC and chief executive officer, Profectus Capital, told Business Standard, generally the April-June period is a soft quarter. However, there has been an uptick in housing and auto loans, which is an encouraging sign.

The satisfactory monsoon and soft rate regime will give impetus to capital expenditure and credit offtake in the second half. The Reserve Bank of India’s (RBI's) stance on rates will also have a bearing on trends.

RBI’s caution on growth and practices in certain loan segments will play out, leading to a moderation in the unsecured credit and gold loan segment, Srinivasan added.