The imminent slowdown in credit growth of non-banking financial companies (NBFCs) could lead to a credit crunch in India, with overall system credit growth falling to less than 10%, Credit Suisse said in a report.
“NBFC/housing finance companies (HFCs) have played a major role in credit supply in recent years, accounting for 25-35% of incremental overall credit. Even as bank credit growth in the last two years has averaged at 7%, a strong 20%+ growth in NBFC credit aided overall credit expansion beyond 10%,” said Credit Suisse.
Over the last few years, NBFCs/ HFCs have seen strong supply of funds from banks (43% year-on-year growth as of August 2018) and mutual funds (around 35% of debt assets under management), making this asset class among the largest exposures for these fund suppliers, said the report.
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