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After RBI intervention: QoQ for NBFCs’ consumer and gold loan sanctions decreased in Q4 of FY24

Submitted by admin on July 5th, 2024

In the fourth quarter of fiscal year 2023–2024 (Q4 FY24), finance businesses’ sanctioned loans in the consumer credit and gold loan categories decreased one after the other, after a warning from the banking regulator on the rapid increase of this type of credit.

Data from the Finance Industry Development Council (FIDC) shows that consumer loan sanctions decreased by 16.2% in Q4 FY24 compared to Q3. The total amount of loans approved by non-banking finance firms (NBFC) decreased to Rs 25,358 crore in Q4 from Rs 30,269 crore in Q3. Although the growth slowed down sequentially in Q4 FY23 as well, it was just a 4% decrease.

In Q4 FY24, there was a sequential decline of 6.5% in gold loan sanctions. Sanctions totaling Rs 47,092 crore were imposed, as opposed to Rs 50,340 crore in Q3 of FY24. With 34% quarter-over-quarter (QoQ) increase in Q4 FY23, the gold loan category reached its peak.

The Reserve Bank of India’s (RBI) “cautionary advice” is probably why a number of consumer lending sectors, including education, consumer, and gold loans, had negative QoQ growth, according to a statement from FIDC.

Sanctions on personal loans also decreased, increasing by just 1.4% QoQ in Q4 of FY24. FIDC statistics showed that in Q4 FY23, sanctions had increased by 5% QoQ.

In addition to increasing the risk weights for unsecured loans in November 2023, the RBI restrained IIFL Finance, a significant participant in the gold loan market, by ordering it to cease issuing new penalties and payments due to significant supervisory concerns.
The overall growth rate of NBFC loan sanctions decreased to 2.6% QoQ in Q4 FY24 from 7% in Q4 FY23.
Co-chairman of FIDC K V Srinivasan told “Business Standard” that the first quarter of the fiscal year is typically sluggish and accounts for a minor portion of the company’s overall revenue. The current fiscal year’s activity would be impacted by the RBI’s caution and action, which caused a slowdown in business in Q4 FY24.

The rating agency ICRA claims that throughout the course of FY2017–FY2024, the financial businesses’ robust compound annual growth rate (CAGR) of almost 15% has helped them progressively strengthen their position in the industry. In FY25, it is anticipated that total NBFC loan would surpass Rs 50 trillion (Rs 34 trillion excluding NBFC-Infrastructure).

The rating agency also stated that given the new products and services as well as the growing connections between NBFCs and other financial sector organizations, the notable increase in AUM called for appropriate regulatory development.