Tuesday, September 28, 2021

NBFCs open their wallets as demand for credit surges

Wednesday, September 15, 2021, 1:05
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Demand for loans to purchase trucks and construction equipment is gathering steam and back to the pre-Covid levels on rising infrastructure spending by governments and capital expenditure by private companies.The demand for retail credit too is back on track, shrugging off the economic cost of the pandemic.Non-Banking Finance Companies (NBFCs) such as Shriram Transport, Edelweiss and IIFL that were shrinking to conserve capital have opened their wallets and are lending as much as Rs 4,000 crores a month. Country’s largest mortgage lender HDFC Ltd is witnessing a significant rise in home loan demand similar to pre-covid levels. 86218444″For the first time after the beginning of the pandemic we are disbursing loans every month like pre-covid levels,” said Umesh Revankar, managing director at Shriram Transport Finance. “Trucks’ movement began to regain normalcy prompting many to expand businesses. We expect double-digit y-o-y loan growth this fiscal.”Shriram Transport is disbursing more than Rs 4,000 crore every month, which was like the times before the pandemic dampened businesses. Additional loan demand is coming from equipment finance, tractor and light commercial vehicles.Edelweiss is bracing up for a spurt in credit demand for buying construction equipment amid rising capital expenditures.”In August and September, we have attained business volumes similar to pre-covid levels for secured loans,” said Deepak Mittal, CEO at ECL Finance, the non-bank entity of Edelweiss group. “Even MSME loans are adding to credit demand. We have started funding their expansions.’Road construction is expected to pick up from this month onwards once the monsoon starts receding. Supported by the government’s focus on increasing infrastructure spending, construction activity, according to ICRA Ratings, is expected to see sustained recovery in the coming quarters and support volumes for the mining and construction equipment (MCE) industry.Besides, individual borrowers and small traders are seeking to buy homes and support expansions. The second wave of covid infection could not interrupt businesses the way the first wave did last year.”We see more credit demand coming up ahead of the festival season and with the rising pace of vaccinations,” said Nirmal Jain, Chairman at IIFL group. “The second wave was short-lived unlike the first wave of coronavirus, when we did not have any handbook to deal with its economic impact.”IIFL group is disbursing over Rs 2,000 crore worth of loans per month that customers are taking to purchase homes and support small businesses. They are pledging gold to raise credit to ease the urgent liquidity crisis. It has seen retail loan disbursements rising to pre-covid levels.Small retailers have resorted to social media like Facebook or whatsapp to deliver products at the doorsteps. They are expanding their product kitty. Electronics goods are in high demand with a larger section of the population working from home.Home and gold loans have already started pacing up with home financier HDFC seeing higher loan demand.“The demand for home loans continues to remain strong,” said Renu Sud Karnad, managing director at HDFC Ltd. “Disbursements have picked up with the unlocking of respective locations.”Currently, monthly disbursals at the home financier have already risen more than pre-covid levels. During the quarter ended June 30, 2021, individual loan disbursements grew 181 percent over the corresponding quarter of the previous year.

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