NBFC-MFIs' assets under management are expected to grow by up to 30 percent in the current financial year, domestic rating agency Crisil said on Thursday.
The year will also see an improvement in asset quality and profitability for the Non-Bank Finance Companies-Microfinance Institutions (NBFC-MFI) segment, the agency said.
In a report, Crisil said the NBFC-MFI segment's Assets Under Management (AUM) stood at Rs 1.3 lakh crore at the end of March 2023, and the segment has the highest share in the overall microlending universe which also consists of small finance banks, universal banks and other lenders.
The overall AUM is expected to have touched Rs 3.4 lakh crore for the entire microlending universe and the growth in NBFC-MFIs has outpaced the same of other lenders.
The growth in the NBFC-MFIs segment has come on the back of pent-up demand for credit and increase in ticket-size of disbursements, the agency said.
Crisil's senior director Ajit Velonie said the market share of NBFC-MFIs grew by 7 percentage points in the last 33 months to 38 percent.
The top-five states now comprise over half of the overall AUM for the NBFC-MFIs, and the list is led by Bihar at 12.7 percent, followed by Tamil Nadu (11.1 percent) and Karnataka (10.0 percent), Velonie added.
Stressed assets, which includes gross non-performing assets and the restructured assets, has fallen to 3 percent as of March 2023 from 6 percent in December and 13 percent in September 2021, it said.
NBFC-MFIs have been cleaning up their pandemic-impacted loan books through write-offs and sale to asset reconstruction companies through last fiscal. This, coupled with lower slippages in recent originations has helped bring down their stressed assets level, the agency said.
Profitability, which is measured by return on managed assets, is expected to exceed 3 percent in FY24, versus 1 percent in FY21 and FY22, and between 1.5-2 percent in fiscal 2023, it added.
With all this in place, the agency expects the credit profiles of microfinanciers to strengthen this fiscal.
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