The consolidated balance sheet of non-banking financial companies (NBFCs) expanded at a slower pace in 2018-19 and in the first half of 2019-20 in the aftermath of a series of defaults at IL&FS and rating downgrades of a few companies, according to the Reserve Bank of India.

The RBI report on ‘Trend and Progress of Banking in India 2018-19’, which was released on Tuesday, noted that housing finance companies also experienced deceleration in credit growth and muted profitability as market confidence in the sector waned.

Growth of NBFC sector

The NBFC sector grew in size by 17.9 per cent to ₹30.9-lakh crore in 2018-19 from ₹26.2-lakh crore in 2017-18 when it had registered a year-on-year growth of 26.8 per cent.

By September-end 2019, the total assets and liabilities of NBFCs stood at ₹32.57-lakh crore, or a 13.2 per cent growth.

“The pace of expansion was lower than in 2017-18, mainly due to rating downgrades and liquidity stress in a few large NBFCs in the aftermath of the IL&FS event,” it noted.

While the slowdown was witnessed mainly in the non-deposit-taking systemically important NBFC category, deposit-taking NBFCs broadly maintained their pace of growth, the report said, adding that in in 2019-20 (up to September), growth in the balance sheet size of both these categories of NBFCs had moderated due to a sharp deceleration in credit growth.

Credit disbursal

The report noted that credit extended by NBFCs continued to grow in 2018-19, albeit at a slower pace of 16 per cent, against 31.8 per cent in 2017-18.

Industry is the largest recipient of credit provided by the NBFC sector, followed by retail loans and services. Credit to industry and services was subdued in relation to the previous year.

However, growth in retail loans continued its momentum, it said.

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