The asset under management of non-banking finance companies, including housing finance companies, is likely to see a positive growth but will be muted at 5-6% in the next financial year, according to Crisil Ratings.
The turnaround will be led by larger entities with stronger parentage. In the current fiscal, NBFCs' AUM is likely to de-grow for the first time in the last two decades, it said.
"Navigating a raft of headwinds for over two fiscals culminating in de-growth in the current fiscal assets under management of non-banking financial companies is set to grow again although at a relatively subdued 5-6% next fiscal," the agency said in a report.
According to the agency's president Gurpreet Chhatwal, despite estimated GDP growth of 10% next fiscal, overall NBFC sector growth is likely to be slower because access to funding remains a challenge due to concerns about the impact of the pandemic on asset quality.
"Additionally, competition is expected to be more intense from banks which are flush with low-cost deposits and better placed with improved capital buffer than in the previous years," he said.
The rating agency said the challenges faced by NBFCs in gaining funding access at optimal costs will mean they cede overall market share to banks in the near term, especially in their two biggest segments home loans and new vehicle finance.
"Currently they have about 18 % market share in the total credit pie and we believe that will slip to 17% in FY22," Chhatwal said
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