NBFC Loan Sanctions Increase 12 Percent in Q1FY25 Driven by Home and Auto Loans
Loan sanctions by non-banking finance companies in India increased by 12 percent year-on-year in Q1FY25, totaling Rs 5.08 trillion, up from Rs 4.54 trillion a year earlier, according to the Finance Industry Development Council. Key drivers included home loans, which rose to Rs 50,826 crore, auto loans reaching Rs 25,022 crore, and personal loans increasing to Rs 71,306 crore. However, the sector faced an 11 percent decline compared to the previous quarter, reflecting seasonal trends. Gold loans surged by 26 percent, while construction equipment loans experienced negative growth. K V Srinivasan of FIDC noted the April to June period typically sees soft demand but highlighted the positive momentum in housing and auto loans. Looking ahead, favorable monsoon conditions and low-interest rates are expected to boost credit demand, although the Reserve Bank of India's cautious stance may temper growth in unsecured lending segments.
NBFC Loan Sanctions Surge 12 Percent in Q1FY25 Led by Home and Auto Segments
Loan sanctions by non-banking finance companies in India experienced a significant year-on-year increase of 12 percent in the first quarter of FY25, driven primarily by robust demand in the home, auto, and personal loan sectors. According to data from the Finance Industry Development Council, the total loan sanctions reached Rs 5.08 trillion during the April to June 2024 period, compared to Rs 4.54 trillion in the same quarter of the previous year.
Despite this positive trend, the sector saw an 11 percent decline in loan sanctions compared to the previous quarter, reflecting seasonal fluctuations typical of the April to June period. Key segments that contributed to the growth included:
- Home Loans: Sanctions in this category amounted to Rs 50,826 crore, up from Rs 47,084 crore in Q1FY24.
- Auto Loans: The sector saw sanctions rise to Rs 25,022 crore, compared to Rs 22,823 crore a year earlier.
- Personal Loans: These loans increased to Rs 71,306 crore, growing 12 percent from Rs 63,494 crore in the previous year.
- Gold Loans: Sanctions surged 26 percent to Rs 79,217 crore, highlighting a strong demand for secured lending.
However, construction equipment loans showed a negative growth trend, indicating challenges in that specific sector. K V Srinivasan, co-chairman of FIDC, noted that while the April to June period is traditionally soft, the uptick in housing and auto loans is encouraging.
Looking ahead, industry experts anticipate that favorable monsoon conditions and a sustained low-interest rate environment will boost capital expenditure and credit demand in the latter half of the fiscal year. However, the Reserve Bank of India's cautious stance on economic growth and scrutiny of certain lending practices may lead to a moderation in unsecured credit and gold loan segments, influencing the overall lending landscape.
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