India's non-banking financial companies (NBFCs) are poised to navigate the US-Iran war with resilience, according to industry executives. Despite the geopolitical tensions, credit demand remains robust, and NBFCs are well-positioned to bridge the credit gap for India's 60 million small businesses, with only 20-30% currently accessing credit. This critical role is further emphasized by the NBFCs' growing contribution to India's total credit supply, which has risen to over 18% in the past decade. As a result, the financial ecosystem relies on NBFCs for 'last mile connectivity' to enable credit flow.
However, industry experts caution that some pressure could emerge at the margins. The income of the rural and emerging economies may contract, potentially impacting credit performance. Yet, the demand for credit is expected to persist, and lenders must act responsibly and vigilantly to meet this demand at scale. This is especially true as NBFCs gain access to new funding avenues, with a focus on scaling fixed income as a source of funding.
Gold price volatility, a key concern for lenders, has not significantly impacted the gold loan business. Elevated gold prices, despite the West Asia war, have not created unmanageable risks. Moderate volatility is manageable, and lenders can adapt to changing market conditions. This adaptability is crucial for NBFCs to maintain their role in India's financial system, ensuring a steady credit supply and supporting the country's economic growth.
