SME and Retail credit to have a promising future

Credit

According to a CIBIL report, more than 150 million borrowers, both SMEs and individuals who are creditworthy are not getting access to credit. While corporate sector saw a credit growth till 2014-15, housing finance has grown since then. Also, the SME credit is another key area which is showing growth prospects.

Why is this important

Indian households are witnessing a shift and have started to borrow more on the credit side, taking home loans, car loans and education loans. Historically, Indians have always bought gold, real estate and saved cash, but, Indian households have started to deploy their savings and are accessing equity markets, bond markets, mutual fund and insurance products With this change in behaviour and a positive outlook towards credit and investment.

According to CRISIL, while banking is touted to grow at 7%, the lending to MSME in India will grow at an 11% CAGR in the next two fiscals. The cumulative market share of NBFCs in MSME financing has risen ~8% in FY2017 from ~8% five years ago. As of November 2017, MSME lending market size was ~ Rs.14 lakh crores.

Sector-wise Credit Disbursal

Stocks to be positively impacted

Edelweiss Financial Services Ltd. (CMP: Rs. 312, Market Cap: Rs 28,550, FY2020 P/B: 3.13)

Bajaj Finance Ltd. (CMP: Rs. 2,092, Market Cap: Rs 120,937, FY2020 P/B: 5.15)

L&T Finance Holdings Ltd. (CMP: Rs. 163, Market Cap: Rs 32,530, FY2020 P/B: 2.0)

 

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