RBI Highlights Robust Prospects For NBFCs In Vehicle & Gold Loan Segments
**Prospects for NBFCs in Vehicle Loans and Gold Loans Remain Robust: RBI Bulletin**
*Mumbai:* Prospects for Non-Banking Financial Companies (NBFCs) in segments like vehicle loans and loans against gold appear robust, supported by improvements in vehicle sales and rising gold prices, according to an RBI bulletin released on Wednesday.
The bulletin underscored the vital role NBFCs play in India’s economic growth. By providing finance for infrastructure, vehicles, housing, and consumer goods, these institutions boost aggregate demand, generate employment, and contribute significantly to the country’s economic expansion.
The growing contribution of NBFCs to credit, particularly in the industrial and retail sectors, is reflected in their rising credit-to-GDP ratio. Additionally, the introduction of the Liquidity Coverage Ratio (LCR) is expected to further strengthen NBFCs’ short-term resilience.
As the financial sector increasingly embraces artificial intelligence (AI) and machine learning (ML), the RBI highlighted the importance of NBFCs remaining vigilant in addressing cyber challenges. Leveraging these technological advancements effectively is crucial for sustaining growth and security.
In India, NBFCs continued to record double-digit credit growth as of the end of December 2024. This expansion is evident from the rising NBFC credit-to-GDP ratio, driven mainly by lending to the industrial and retail sectors, which dominate their loan portfolios.
The bulletin also noted that the NBFC sector remains robust across various profitability and prudential indicators, including return on assets (ROA), return on equity (ROE), net interest margin (NIM), capital to risk-weighted assets ratio (CRAR), and non-performing assets (NPAs).
Growth in unsecured loans, which had seen a spike, was managed effectively through an increase in risk weights introduced in November 2023.
Regarding sources of finance, NBFCs continue to rely largely on bank borrowings and debentures. Their role in credit intermediation and the interlinkages with banks and other financial institutions have important implications for the transmission of monetary policy impulses to the financial sector and the broader economy.
Empirical analysis indicates that monetary policy transmission to NBFCs’ borrowing and lending rates occurs, although it remains incomplete, the RBI bulletin stated.
*Disclaimer: This story is from a syndicated feed. No changes have been made except to the headline.*
https://www.freepressjournal.in/business/rbi-highlights-robust-prospects-for-nbfcs-in-vehicle-gold-loan-segments
