A Crisil report projects a 14-16% compound annual growth in retail credit through FY28, creating new funding opportunities for Non-Banking Financial Companies.
A new report from Crisil Intelligence reveals that a sustained surge in India's retail credit demand is creating significant opportunities for Non-Banking Financial Companies (NBFCs) to expand and diversify their investor base. The report projects strong, continued growth in the sector, signaling a major opening for financial institutions to attract new funding sources amid rising consumer appetite for credit.
According to the report, the rapid growth in retail borrowing allows NBFCs to look beyond traditional funding and woo new categories of investors. Crisil Intelligence stated, “The increasing demand and positive sentiments in the Indian retail credit market present an opportunity for both banks and NBFCs to broaden their investor base.” This expansion is critical for NBFCs to fuel their growth and meet the escalating demand.
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The Indian retail credit market is projected to grow at a compound annual growth rate (CAGR) of 14-16% between FY25 and FY28. This follows a period of robust expansion, with the market reaching a total size of Rs. 82 trillion in FY25, having grown at a 15.1% CAGR since FY19. This growth is driven by strong demand across key segments, including housing finance, auto loans, personal loans, and a consumption-led surge in credit card usage.
A key factor indicating future growth is India's relatively low credit penetration. The report highlights a substantial gap, noting that India's household credit-to-GDP ratio stood at 42% in the 2024 calendar year. This is significantly lower than in other major economies like China (60%), the United States (69%), and the United Kingdom (76%). This gap points to "vast potential for further credit growth in India, especially in underserved segments."
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The ongoing credit boom is supported by several factors beyond just consumer demand. The Crisil report attributes the momentum to growing financial awareness among the population, government initiatives aimed at boosting financial inclusion, and improved access to credit for previously underserved communities. This combination of factors is expected to drive credit penetration higher, with retail credit leading the charge.
The outlook for India's retail credit market remains highly positive, with significant headroom for expansion. As the market continues on its strong growth trajectory, NBFCs are well-positioned to capitalize on this trend by diversifying their funding sources and expanding their investor base. This will not only support their own growth but also play a crucial role in deepening financial inclusion across the country.
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