NBFC Lending Contracts For Second Straight Quarter

Lending by the struggling non-banking sector contracted for the second straight quarter even as funding environment improved.

Loans sanctioned by non-banking financial companies declined 34 percent year-on-year in the quarter ended September to Rs 1.95 lakh crore, according to data from industry body Finance Industry Development Council. That came after a 15 percent contraction in the previous three months.

That shows the capacity of the crisis-hit industry continues to wane more than a year after the collapse of the Infrastructure Leasing and Financial Services group led to higher costs. Non-bank lenders borrowed overseas and sold loans generate capital for debt repayment and fresh loans. But while markets continue to offer well-established and strong NBFCs a lower rate in the past two months, the wider industry faces a liquidity crunch, hurting growth.

Total loans sanctioned by NBFCs in the second quarter declined to Rs 1.95 lakh crore from Rs 2.94 lakh crore a year earlier.

NBFCs' personal, gold, used-car and consumer loans, along with lease financing segment, grew in the second quarter. But growth slowed from the previous year for each of these categories.

• Auto loans declined 1 percent in July-September at a time the industry grapples with a prolonged slowdown. Loans to commercial vehicles tumbled 36 percent.
• NBFCs witnessed a 23 percent decline in home loans at Rs 48,075 crore during the quarter.

Cash credit facilities, overdrafts and long-term loan sanctions by NBFCs also fell in the second quarter of this fiscal. Sanctions to segments, including demand loans, equipment financing and cash credit, worsened from the previous quarter.

According to FIDC-CRIF data, the decline in lending by NBFCs was the highest in urban areas at 41 percent lower than a year earlier compared with a 11 percent fall in rural areas.