NBFC Loan Growth Fuels Moody's 6.6% Growth Outlook For Indian Economy

(MENAFN- KNN India) New Delhi, May 15 (KNN) Moody's Ratings, a prominent credit rating agency, released its economic projections for India on Tuesday.

According to their assessment, the Indian economy is anticipated to expand by 6.6 per cent during the current fiscal year 2024-2025 (FY25), followed by a 6.2 per cent growth rate in the subsequent fiscal year.

A key factor underpinning this forecast is the robust credit demand fueled by the country's strong economic growth, which is anticipated to bolster the profitability of the Non-Banking Financial Company (NBFC) sector.

Moody's highlighted that the prevailing robust economic conditions will aid in preserving the asset quality of NBFCs, even as rising interest rates increase the debt burdens of their customers.

"Funding costs for NBFCs in India are rising, but strong credit demand fuelled by the country's robust economic growth will support the sector's profitability," the agency stated.

Loan growth at NBFCs has gained momentum, with aggregate year-on-year loan growth accelerating to 20.8 per cent in September 2023, up from 10.8 per cent a year earlier. This surge has been driven by robust demand for retail loans, including housing and automobile financing.

Looking ahead, Moody's anticipates loans at NBFCs to grow by approximately 15 per cent over the next 12-18 months, propelled by various lending segments, such as infrastructure financing by large government-owned NBFCs and loans to small and medium-sized enterprises.

While acknowledging that growth in unsecured retail loans may slow after the Reserve Bank of India (RBI) increased the risk weight of such credit assets for both bank
s and NBFCs in December 2023, the agency underscored the vital role NBFCs play in meeting credit needs across India's vast economy.

Moody's projections for India's GDP
growth in FY25 are lower than those of the RBI and some other agencies but align with the forecast by Deloitte. The RBI has projected a 7 per cent growth rate for the current fiscal year, while estimates from the Asian Development Bank (ADB) and Fitch Ratings also stand at 7 per cent. S&P Global Ratings and MorganStanley
have projected a 6.8 per cent growth rate, while Deloitte India's estimate matches Moody's at 6.6 per cent.

(KNN Bureau)

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