Bombay : Non-banking financial firms expect a turnaround in loan disbursements this year, particularly in rural areas, although consumers remain cautious about spending and lenders face rising operating costs in reason for inflation.
Mahindra Finance, which is looking to double its business growth this year, expects loan disbursements to resume with vehicle prices rising and chip shortages possibly easing. The non-bank lender is also looking to diversify its portfolio, with 15% of the loan portfolio coming from non-automotive segments such as SMEs, real estate and leasing.
“Our collections have exceeded disbursements so far. It is now that we have started the growth of disbursements. Assets this quarter increased slightly by 1 to 1.5%. I have no doubt that asset growth is starting to happen. Vehicle prices will increase. Even for the same volume, the disbursement value will be high. Once the chip problem is fixed, sales will increase. Markets are opening up and demand is increasing,” Ramesh Iyer, Managing Director and Managing Director of Mahindra Finance, said in an interview.
Shriram Transport Finance also expects strong rural demand for loans for financing used vehicles and small utility vehicles. The non-bank lender reported 10% sequential growth in disbursements as price increases for new and used VCs led to an increase in ticket sizes, contributing to growth in the value of disbursements. But growth in volume is still moderate.
“Rural demand is very high. Demand for used vehicles and small utility vehicles is good. Demand for heavy-duty vehicles increased in March, but fell in April. The demand could come once the geopolitical tensions are over. Government spending has also slowed,” Umesh Revankar, managing director of Shriram Transport Finance, said in a post-earnings call with investors.
Credit growth for the banking system recovered significantly at the start of fiscal 2023 to 11.2% from 5.3% a year ago. According to India Ratings, credit growth could be moderate in the short term.
“The tailwinds are driven by a pick-up in credit growth in the industrials and services segments (February 2022 basic data), although growth in the agriculture segment remains stable and subdued in the retail segment Over the medium term, inflationary pressures, supply chain disruptions and weak consumer demand could disrupt the current recovery in credit growth. interest rates, as indicated by the 40 basis point increase in the repo rate by the Reserve Bank of India, would weigh on credit growth as borrowing becomes more expensive,” the agency said. rating.
Iyer said while sentiment has improved, rural customers remain cautious about spending in the post-covid era. While aspirational spending has declined, demand for subsistence assets has increased and demand for non-subsistence assets continues to be weak, even as operational costs have increased, leading to reduced margins .
An IIFL report from April 22 says there are signs of strain in rural areas, adding that real wage growth has stagnated while unemployment has held steady at 7% amid falling unemployment. participation in the labor market.