NBFC loan sanctions down 13% in Q2

MUMBAI: The loans sanctioned by non-bank finance companies in the second qurater of FY25 shrunk both sequentially and year-on-year. While the quarterly decline was largely driven by a sharp fall in gold loans, loans against shares and unsecured business loans, the annual drop was because of a decline in term loans and loans against shares.
Overall, industry-wide sanctions in Q2 FY25 dipped by about 13% year-on-year to nearly Rs 7.8 lakh crore from Rs 8.93 lakh crore a year earlier. Sequentially, the decline was 0.3% – from Rs 7.82 lakh crore.
RBI, which has discouraged top-up and unsecured loans, has also placed restrictions on a large finance company from extending gold loans, which was lifted in the third quarter.
Gold loans sanctioned by finance companies dropped 35% sequentially to Rs 60,916 crore. However, year-on-year, there was marginal increase of 5.7%.
Urban loan sanctions experienced a sharp year-on-year decline of approximately 23%, reflecting a contraction in lending activity in metropolitan areas. Commercial vehicle loans declined by 8.7%, while education loans fell by 10%, signalling challenges in these sectors. Loans against securities witnessed a sharper drop of 18%, and long-term loans experienced a steep 50% decline, suggesting a broader shift in financial institutions’ risk appetite and consumers’ borrowing preferences.
In contrast, semi-urban and rural loan sanctions displayed modest growth.