State-run NBFCs to gain mkt share, see 15% loan growth in 2 yrs - S&P report
This story was originally published at 13:37 IST on 26 May 2025
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--S&P: India govt-owned non-bank fincl institutions to sustain strong growth
--S&P: India govt-owned non-bank fincl cos to gain mkt share in next 2 yrs
--S&P:See India govt-owned non-bank fincl cos' loan growth 15% YoY for 2 yrs
--S&P: See relatively higher growth for NaBFID, IREDA from low base
--S&P: Expect govt-owned NBFCs' credit costs to rise as recoveries fall
MUMBAI – Government-owned non-bank financial institutions will sustain strong growth and gain market share over the next two years, according to S&P Global Rating's report. The rating agency pegs the loan growth of these financial entities at 15% in the next two years "aided by mandates to drive the development of strategic sectors", it said in the report.
"Financial services is one of the four strategic sectors in India. As such, government-related entities in the sector are more likely to benefit from government support," Deepali Seth Chhabria, credit analyst at S&P Global Ratings, said in the report. "This is particularly so for those that play policy roles. In our view, government linkages provide financial flexibility, access to cheaper funding, and a mechanism for asset quality support."
Despite expectation of sustained growth in the sector, the rating agency raised concerns regarding bad loans. In terms of asset quality, the rating agency said it is a mixed bag due to the exposure of some players to weak borrowers, though such risks are limited due to support from the government.
"Credit costs for the sector have improved and are better than peers," Geeta Chugh, a credit analyst at S&P Global Ratings, said in the report. "However, we expect credit costs for the sector to rise as their loans season, recoveries dwindle, and benefit of excess provisions created in previous years tails off."
Among the government-owned entities, S&P Global expects National Bank for Financing Infrastructure and Development and Indian Renewable Energy Development Agency Ltd. to post relatively higher growth as they scale up their business from a low base. Similarly, development financial institutions such as Power Finance Corp. and REC Ltd. are likely to achieve higher margins due to their exposure to weaker borrowers.
On the other hand, institutions such as Small Industries Development Bank of India, National Bank for Agriculture and Rural Development, National Housing Bank, Indian Railway Finance Corp, and Export-Import Bank of India tend to have weak margins on account of their policy roles. Some operate on cost-plus basis while others have a cap on lending margins for the refinance business, S&P Global said. End
Reported by Christina Titus
Edited by Tanima Banerjee
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