Page 31 - Bullion World Volume 4 Issue 11 November 2024

Bullion World | Volume 4 | Issue 11 | November 2024

reduced during this period, which were largely focussed
on retail GLs for consumption or business purposes. Yield pressures faced by the NBFCs in FY2022 and
FY2023, have abated to some extent in FY2024;
Public sector banks (PSBs) accounted for about 63% however, they continue to remain 200-300 basis points
of the overall GL in March 2024, up from 54% in March (bps) lower than the peaks witnessed in FY2020/
2019, while the NBFC and private banks’ shares FY2021. Credit costs have remained low, staying well
moderated by equal measure during this period. The below 0.5% in the last five years. Access to collateral
NBFCs, however, continue to hold a stable share in the and the liquid nature of the same
retail GL over the last 3-4 years. ICRA expects NBFC GL reduce the lender’s credit risk. In case of loan overdues,
to expand at 17-19% in FY2025 and projects it to grow lenders undertake timely auctions, which have helped in
at a CAGR of 14-15% during FY2026-FY2027. healthy realisations.

“Over the recent past, NBFC GL growth trends were Entities are steadily augmenting their online lending
influenced by the trends demonstrated by other loan and a sustained scale-up should help improve their
products, namely microfinance, unsecured business operating leverage and augment their customer base.
or personal loans, which are also targeted at similar The directions restricting cash disbursements (on loans
borrowers. With intensifying headwinds for unsecured more than Rs.20,000/-) have not impacted business
loans, resulting in lower growth vis-a-vis the previous significantly as entities have been able to adapt to the
fiscal, and supported by buoyant gold prices, the NBFC new requirement.
GL book growth revived in FY2024 and the trend is
expected to continue into FY2025,” A M Karthik, Co- “Healthy growth outlook, low credit cost and a relatively
Group Head, Financial Sector Ratings, ICRA Limited improved pricing power for gold loan companies support
said, speaking on this. their credit risk profiles. This asset class, however, is
highly regulated around various operational aspects,
Growth in the GL book of NBFCs is largely driven by the including branch opening, collateral evaluation and
gold prices as the branch additions and the tonnage storage, auction process etc. Thus, improving operating
of gold jewellery held as collateral grew at the modest efficiencies in view of the above, would be the key and
pace of 3-4% vis-à-vis the 18% growth in the loan book provides scope for the players to further strengthen their
during FY2020-FY2024 for the larger players. The NBFC earnings performance,” Karthik added.
GL book is quite concentrated, with the top four players
accounting for 83% share in March 2024; this, however,
declined from 90% two years ago as some of the existing
players have diversified to this segment and some newer
players have emerged.

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