Retail Credit: ‘High Growth and Reasonable Risk Adjusted Return’
Credit penetration in India continues to grow at a record pace, especially in under-served areas of low to
medium income borrowers and medium to small businesses. This is being fueled by NBFCs, housing
finance and micro finance companies. Several of these small-medium size NBFCs are well managed with
good corporate governance practices, have access to equity from private equity investors. Some of these
have improved their credit profiles on the strength of demonstrated track record in scaling up while
managing good asset quality and improving on earnings.
However, still several of these companies continue to rely primarily on funding from banks and struggle
to access credit especially via the route of fixed income markets, despite offering reasonable credit risk
profile. This note focusses the performance of retail credit segment and the opportunities it offers to
bond market investors to generate reasonable risk adjusted returns.
