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Retail lending by non-banking finance companies (NBFCs) increased at its fastest pace during 2016-17 on account of consumer durables and credit card receivables, according to the RBI.
Retail loans of NBFCs had increased 21.6 per cent from ₹2.04 lakh crore in the year ended March 2016 to ₹2.49 lakh crore in March 2017.
“This was followed by services and industry. On the other hand, credit to agriculture and allied activities contracted, perhaps on account of transitory disruptions in cash-intensive value chains due to demonetisation,” the RBI said.
Credit to the micro and small segments in both the industry and services sectors displayed robust growth while vehicle loans declined in the last financial year.
The profitability of NBFCs declined during the year under review due to increased provisioning requirements. “Their cost-to-income ratio increased reflecting deterioration in operational efficiency.”
Their return on equity and return on assets were also lower during 2016-17 than in the year-ago period.
There was also some deterioration in the asset quality of NBFCs, mainly on account of the sluggishness in industrial activity.
“Deterioration of asset quality was also evident in the increased share of doubtful assets denoting the ageing of NPAs in the sector,” the report said.
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