Less unsecured loans to slow NBFCs’ co-lending

“With recalibration in growth of personal loans following increase in risk weights, the share of personal in the co-lending book could decline in fiscal 2025, and that of MSME and home loans should go up" said Malvika Bhotika, Director, CRISIL Ratings. " This will be supported by the government's focus on increasing the share of MSME sector contribution in India’s gross domestic product and ‘Housing for All’ initiatives. Net-net, co-lending will continue to see increased traction as NBFCs look for alternate funding sources to cater to the healthy demand for retail loans.”

Of the current overall co-lending book, personal loans alone account for about a third of the assets managed by NBFCs, followed by housing loans at 20% and unsecured MSME loans and gold loans each making up 13% of the pie. Secured MSME (including loan against property) and vehicle loans comprise the rest 20%.

Crisil studied 100 NBFCs for over 90% of the sector’s assets under management. Interestingly, only about a third of these have active co-lending books at present. Co-lending assets under management of NBFCs is nearing Rs 1 lakh crore after more than 5 years since the model came into being, Crisil said. Over the medium term, the rating agency sees a healthy growth momentum at 35-40% annually, amidst rising interests of partners – NBFCs as well as bank.