Moody’s Ratings on Tuesday projected the Indian economy to grow at 6.6 percent in the current fiscal year. Strong credit demand and strong economic growth will support the profitability of the non-banking financial companies (NBFCs) sector, it said.
„We expect India’s economy to expand at 6.6 per cent in the year ending March 2025 (FY25) and 6.2 per cent next year, and this will lead to stronger credit growth among NBFCs, reducing the impact of rising funding costs on their profitability.” Moody’s Ratings said.
Indian economy is expected to grow at 8 percent in FY 2023-24.
“Funding costs for non-banking financial institutions (NBFCs) in India are rising, but strong credit demand fueled by the country’s strong economic growth will support the sector’s profitability.
„Also, strong economic conditions will help protect their clients’ asset quality even as rising interest rates increase their debt burdens,” Moody’s said.
India’s Growth Forecast
Moody’s FY25 GDP growth projections are lower than those of the Reserve Bank of India (RBI) and other agencies, but in line with Deloitte’s.
The Reserve Bank had predicted that the Indian economy would grow at 7 percent in the current financial year. The Asian Development Bank (ADB) and Fitch Ratings estimate growth of 7 percent each, while S&P Global Ratings and Morgan Stanley expect a growth rate of 6.8 percent.
However, Deloitte India estimates the country’s GDP growth at 6.6 percent in the current fiscal, driven by higher consumption spending, rebounding exports and capital inflows. However, it also flagged concerns about inflation and geopolitical uncertainties.
Moody’s focus on NBFCs
Moody’s Ratings predicts loans to NBFCs to grow at around 15 per cent in the next 12 to 18 months. This growth is expected to be driven by various types of lending, including infrastructure financing by large government-owned NBFCs and loans to small and medium enterprises.
NBFCs are expected to continue to play a significant role in meeting the credit needs of individuals and businesses in India’s broader economy.
„Growth in unsecured retail loans will decelerate after RBI raises the risk weight of such loan assets by 25 percentage points for both banks and NBFCs in December 2023,” Moody’s Ratings said.
The top 20 NBFCs, known for their strong market positions and extensive history of providing specific types of loans such as housing or commercial vehicle finance, are mostly owned by the government or large corporate groups. The agency says this franchise will provide stability to their finances during stressful times.