NBFCs are anticipating 40-50 per cent jump in MSME loan sanctions and disbursements ahead of the festival season on the back of an over 50 per cent expected rise in sales volumes.
In a recent report, MSME-focused digital NBFC FlexiLoans.com said that it expects a two-fold growth in disbursals with total disbursements of around ₹1,500 crore against loan applications of over 10 lakh during the festive season.
Credit demand from MSMEs is seen surging 11 per cent, significantly higher than the 7 per cent growth witnessed during the first quarter of the financial year.
“We have witnessed an unwavering trend of robust loan demand during this period, emblematic of the thriving economic sentiment,” Manish Lunia, Co-Founder of FlexiLoans said, adding that rising urbanization, incomes and economic activity is leading to 50 per cent of the loan demand originating from tier-3 cities and beyond, and more than 75 per cent coming from outside tier-1 towns.
MSMEs supplying ‘in-demand’ segments like food, apparel, electronics and appliances traditionally experience a surge in their order books over the 3-4-month festival season, led by a surge in consumer demand, especially for business owners selling through modern trade platforms and large format stores.
“During the festive season, MSMEs require additional support from lenders in terms of a temporary increase in their credit limits to effectively manage heightened working capital needs. This flexibility in providing enhanced support proves instrumental in enabling them to capture a surge in sales volume, which is predicted to be 1.5 times higher this year during the festive quarter,” said Saini Rajgopal, Co-founder, Artfine.
Higher sales volumes are also being led by growing popularity of e-commerce, wherein consumers are finding it more convenient to place orders, receive credit card and payment-related offers, and additional discounts and features such as BNPL provided by the e-commerce platforms, industry players said.
“The festive season sees a massive increase in the purchase of white goods, vehicles, personal clothing and décor. Corporate lending would see the highest growth in working capital loans. While in the retail segment, personal loans, auto and equipment loans should witness the highest growth,” said Parry Singh, Founder and CEO, Red Fort Capital.
The online retail sector is expected to see demand of ₹90,000 crore, registering a growth of 18-20 per cent over last year.
Overall, this year’s festival season is expected to generate 15 per cent surge in job opportunities, over 50 per cent sales spike in segments like consumer durables and cars, and around 20 per cent increase in sectors such as jewellery, fashion, and footwear, the report said.
MSMEs’ sales and loan demand is expected to be higher than last year led by improvement in rural consumption on the back of improving employment rates and rising disposable income in rural areas, Singh said.