Outlook 2025: Leveraging tech and policy alignment to drive NBFC growth

New Delhi [India], December 31 (ANI): As India enters 2025, Non-Banking Financial Companies (NBFCs) stand at the threshold of a transformative era, driven by digital innovation, supportive government policies, and an increasing emphasis on sustainability, the industry leaders say.

However, despite these positive developments, several reports indicate that the growth trajectory of NBFCs in India may face headwinds in the financial year 2025, with a potential slowdown in loan disbursements and ongoing regulatory challenges.

The strong asset under management (AUM) growth witnessed by NBFCs in the Financial Year (FY) 2023 and FY24 has weakened in FY25 so far, and this trend is likely to continue, as per a Nomura report.

The key reasons for the slowdown as per the report include reduced disbursement growth, a potential decline in unsecured loans such as personal loans, credit cards, and microfinance due to asset quality concerns, and tighter regulatory oversight.

Another major observation came from the Reserve Bank of India (RBI) report which highlighted the dependency of NBFCs on banks and suggested the need to diversify their sources of funding as a key risk mitigation strategy.

Despite challenges like inflation, geopolitical tensions, and supply chain disruptions in 2024, NBFC leaders remain cautiously optimistic about the coming year, highlighting growth opportunities across the Micro, Small and Medium Enterprises (MSMEs), NBFC, and green financing sectors.

The MSME sector has been a cornerstone of India’s economy, demonstrating remarkable adaptability in challenging macroeconomic conditions, which could be an opportunity for the NBFCs in the upcoming time.

The global financial services company, Nomura, has also expressed its optimism on certain segments such as small and medium enterprise (SME) loans, loans against property (LAP), and used vehicle financing. These areas are expected to maintain growth momentum despite the broader slowdown in the sector.

Navin Saini, Chief Business Officer—MSME and Retail Lending, Arka Fincap, expressed optimism about the sector’s future, stating, “The asset quality outlook for MSME financing in India remains cautiously optimistic in the coming year. Lenders who adapt with proactive risk management, leverage technology, and align with government initiatives will be better positioned to maintain healthy portfolios in the evolving MSME landscape.”

Managing Director & CEO of Namdev Finvest, Jitendra Tanwar, said their "primary focus" will be on "leveraging technology and reducing the cost of funds."

"In 2024, NBFCs played a crucial role in driving financial inclusion, contributing to over 25% of the country’s total lending to MSMEs and underserved communities," he added.

Ankit Modi, Managing Director of SalaryOnTime, highlighted the sector’s potential, saying the growth in the NBFC sector will be driven by strong credit demand from salaried professionals, alongside retail, MSME, and infrastructure segments.

"As India's economy rebounds and digitisation reshapes financial services, NBFCs are uniquely positioned to address the money requirements of salaried professionals and enhance financial inclusion,” he added.

Vikkas Goyal, founder of Rupee112, underscored the importance of operational efficiency and digital innovation, stating, “The NBFC sector is at a crossroads, where opportunities are abundant but so are challenges. Stricter compliance norms and asset quality concerns require NBFCs to focus on consolidation and operational efficiency. The government’s role in supporting the sector remains crucial.”

He added, “By 2025, NBFCs should aim to achieve a diversified portfolio that balances growth with risk. Strategic partnerships with fintech companies and a greater focus on innovation in digital lending will define the sector’s future readiness, making it a cornerstone of India’s financial ecosystem.”

Green finance has emerged as a pivotal growth area, driven by India’s sustainability goals and the adoption of electric vehicles (EVs).

Nehal Gupta, Founder and Managing Director of Accelerated Money For U, noted, “The year 2024 has marked a turning point in green finance, driven by the push for sustainability and India’s rapid adoption of electric vehicles. With the government’s continued support through subsidies and incentives, the EV finance market has seen a double-digit growth rate, particularly in tier-2 and tier-3 cities.”

The real estate and home loan market are also poised for a positive shift in 2025. Atul Monga, CEO & Co-Founder of BASIC Home Loan, observed, “After grappling with challenges like high interest rates and rising property prices, borrowers may finally experience some relief. The RBI’s decision to hold the rates steady throughout 2024, combined with expectations of potential rate cuts in 2025, could ease borrowing costs.”

He added, “Additionally, the government’s strong push for affordable housing under PMAY Urban 2.0 is poised to provide a strong makeover to urban housing. On the technology front, we are on the brink of a digital revolution in home loan processing, making the entire lending and borrowing process faster, more transparent, and user-friendly.”

With the combined forces of government support, technological advancements, and a focus on sustainability, 2025 promises to be a transformative year for India’s financial ecosystem. As sectors like MSMEs, NBFCs, and green financing continue to evolve, the collaboration between regulators, industry stakeholders, and fintech innovators will be crucial in shaping a balanced and resilient economy. (ANI)