The share of non-banking financiers in the overall loan market will go up to 19 per cent by the fiscal 2020 from 16 per cent last fiscal year, primarily because of a strong play in the wholesale segment, says a report.
This will be possible on the back of an 18 per cent annual growth in non-banking finance companies (NBFCs) loan books over the next three years, a Crisil report said today.
The NBFC segment had taken four fiscals for a 3 percentage points jump in the share in the overall loans, from 13 to 16 per cent, it said.
The agency said NBFCs will be able to increase their share in the overall pie despite increasingly aggressive play by private sector banks in the retail segment, and also a possible toughening of stance from the state-run ones after the recently announced capital infusion.
"While NBFCs would continue to do well in their traditional stronghold of retail finance, they are seen growing fastest in the wholesale finance segment, which would provide a kicker to their overall credit growth," it said.
Share of wholesale credit in the overall NBFC credit pie is also expected to increase to 19 per cent by 2020 from 12 per cent in 2014, it said.
The agency said NBFCs, many of them driven by strong parentage, started focusing on the wholesale segment about five years ago.
"The opportunity in realty and the structured credit space has gone up materially after the Rera implementation and the rising demand for mid-corporate promoter financing," Crisil president Gurpreet Chhatwal said.
He said in infrastructure financing, highways offer a large and growing opportunity but was quick to add that there is a concentration risk because of large ticket sizes and so prudent underwriting standards and close monitoring are crucial to sustainable growth.
The report said home loans will grow at 18 per cent over the next three fiscals on a sharper focus by the housing finance companies on the self-employed borrowers and lower ticket size segments.
On the asset quality front, which has been one of the most worrying factors for the banking system, it said the share of dud assets have been stable so far on a better understanding of customers, product innovation and differentiated value proposition for NBFCs.
But the NBFCs will have to balance the risk-reward ratio as increasing competition puts pressure on yields, it said, recommending proactive investments in technology to aid the non-banking lenders.
"Growth of fintechs is an opportunity for collaboration for NBFCs on the origination side and not a competition," senior director Krishnan Sitaraman said, adding the benefits will stem from better quality and lower cost of origination, stronger underwriting norms, more focused identification of customers, and expansion of the target market segment.
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