Risks
Asset Quality Deterioration: Non-Performing Assets (NPAs) due to borrower defaults, especially in unsecured or SME lending, can severely impact profitability.
Funding Risks: Dependence on wholesale funding, volatile interest rates, and ability to raise capital at competitive costs can impact NIMs (Net Interest Margins).
Regulatory Changes: Changes in RBI (Reserve Bank of India) regulations for NBFCs concerning capital adequacy, provisioning, or asset classification can impact operations and profitability.
Intense Competition: From banks, other NBFCs, and FinTechs, leading to pressure on interest rates and market share.
Economic Slowdown: A general economic downturn can reduce credit demand and increase defaults.
Concentration Risk: Over-reliance on a specific borrower segment, asset class, or geographic region.