NBFC lending is as big as the private sector: Aseem Dhru

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Mumbai: Meghnad Desai Academy of Economics (MDAE), India’s top institute for post-graduate Economics, recently had the privilege of hosting Mr. Aseem Dhru, MD & CEO, Small Business, Fincredit India as part of a panel discussion at the institute’s premises. Titled ‘What’s next for the NBFC Crisis and Real Estate Sector?’, the lecture from Mr. Dhru gave an insight on the history of the Indian banking system, the rise of the private sector, factors that have helped ease the banking process in India, the NBFC and Real Estate Sector in India and the reasons for the current crisis in the NBFC and real estate sector.
During the lecture, Mr. Dhru said that NBFC lending is as big as the private sector. “The NBFC balance sheet is growing at 30-35% each year. Today NBFC lending is at Rs 20 trillion and is close to the private sector banks,” Mr. Dhru said. He believes that the lack of access to formalised credit is one of the major factors that has led to the rise of NBFCs that are lending to the uncredited. “With increasing access to technology, even fintech startups have started to capture this untapped market that the banks have either abandoned or have left untouched,” said Mr. Dhru.
Commenting on the current NBFC crisis, Mr. Dhru said, “There are various factors that have contributed towards this crisis. Firstly, PSU banks have been hit by bad loans and NPAs have risen above 10%. While we are expecting more bad loans to come out in the public, this situation has created a panic in the Indian banking system. There has been a phenomenal amount of lending that has gone towards NBFCs but there was a tenure mismatch. This is to say that the lending and borrowing tenure for NBFCs has seen a big mismatch due to which it has created a panic within the NBFC sector and led to the current crisis situation,” said Mr. Dhru. He believes that this problem should be resolved within the next 2-3 years.
With regards to the real estate sector, Mr. Dhru said that the sector has been experiencing a downward trend since 2011-12. “The real estate sector peaked in 2011-12 and since then has seen price corrections. In Mumbai alone, there is a huge unsold inventory and at the pace at which it is being sold off, it will take another 80 months to completely sell off this inventory. Currently, the commercial and affordable housing sector is doing well but the major issue is in the luxury housing sector,” said Mr. Dhru. He believes that this price correction will continue for another 3 years. “With the introduction of RERA, regulation is now being brought into the real estate sector which will create a disciplined system. It will also lead to small builders being eaten up by the big and organised builders,” said Mr. Dhru.
Commenting on the session, Karan Shah, COO, MDAE, said, “Mr. Dhru’s knowledge on the banking system, his views with regards to the NBFC sector and the current scenario within real estate sector has definitely helped us and our students understand the current crisis better. At MDAE, our focus is on providing our students unique and effective learning opportunities that extend beyond the classroom and into the real world. Thus, we were privileged and honoured to have hosted Mr. Dhru at the institute.”