As the Indian economy came out of the shadows of the pandemic-induced slowdown, one business segment that has witnessed a much-awaited upsurge is lending. Even before the Covid-19-led lockdowns, credit growth in the country had been floundering as businesses were cautious about expanding capacity in the wake of a slowdown in economic activities. This, coupled with the huge pile of bad loans in the banking system and some non-banking finance companies (NBFCs) imploding due to poor underwriting practices, had shaken up the supply side of credit, too. Lenders had become cautious about advancing loans.
While NBFCs tried to capitalise on tighter lending norms by the banks and pitched themselves as an alternative form of raising debt capital, they also faced headwinds. The compounded annual growth rate (CAGR) of assets under management (AUM) of NBFCs, which was around 20% between FY10 and FY18, had decelerated to around 15% in FY19. Then, the floor came apart as growth sank to 4% in FY20 and fell further to just 2% in the first year under the lockdown.
But green shoots started appearing the year after with 7% growth in FY22, followed by a 12-13% rise in the year ended March 31, 2023, according to estimates by ratings and research agency CRISIL. Although the higher interest rate regime that was imposed to fight inflationary pressures in the country over the last year is restricting a breakout, growth projections peg the AUM of NBFCs to rise by a tad higher, around 13-14%, in the current financial year.
Fitch-affiliated India Ratings expects this to be slightly higher with a projected growth of 16% for FY24.
This portends well for the job market in the banking, financial services and insurance (BFSI) sector.
Human Capital Picture
We had covered this subject earlier and gathered that the top four NBFCs jointly created around 28,000 additional jobs in the last four years (FY18-FY22). This number was a third of around 87,000 new jobs created by the top four banks in the same period. But the large shadow banks have upped their workforce by 55% in absolute terms in the same period while banks, with a larger base of employees, have pushed up their headcount by around 19%. Bajaj Finance was the flagbearer, more than doubling its workforce with around 20,000 new employees.
If we look at how the large NBFCs behaved in the first three months of the year (January-March 2023) we get a signal that things are hotting up, adding up as a new driver for white-collar jobs in the country. While the IT sector remains under pressure due to the slowdown in the developed markets—a prime business driver for software service providers—the lenders are making up, at least partly, with job creation.
Bajaj Finance, Cholamandalam Investment & Finance, Muthoot Finance, Shriram Finance and Mahindra Finance, put together, added a little over 10,000 to their headcount in the first three months of 2023. This translates into around five new jobs every hour or one new job every 12 minutes!
In the process, the total headcount of these five large NBFC groups breached the 200,000 mark earlier this year from 195,526 as of December 31, 2022. This shows a growth of 5.2% in just three months.
The data for Bajaj Finance includes Bajaj Housing Finance and Bajaj Financial Securities, but much of the headcount is under the flagship Bajaj Finance. In a similar vein, the data for Cholamandalam Investment & Finance includes headcount for people both on and off the rolls of the company.
If we look at the statistics of these five large NBFCs, while Shriram Finance—now housing the combined might of Shriram City Union Finance, Shriram Capital and Shriram Transport Finance—continued to be the leading light in terms of headcount with over 64,000 people in total, Bajaj Finance and Cholamandalam are not too far behind.
In fact, these other two large NBFCs showed a high propensity to add to their workforce with a 6% rise for Bajaj Finance as a group and Cholamandalam going a step further to see an 8.4% rise in headcount early this year.
On the flip side, Muthoot Finance had a relatively muted hiring in the January-March 2023 period on a relative basis. The gold loan financier saw its headcount rising around 3%. The employee count at Mahindra Finance, however, was almost flat with barely a 1% addition early this year.
The future looks much brighter though.
The Naukri JobSpeak Index for the month of May shows the positive nature of hiring activity in the broader banking, finance and brokerage side of the services economy. The latest index number shows how hiring activity is up 14% in the financing business compared with a year ago.
Indeed, banking is part of the quartet of oil and gas, real estate and pharmaceutical sectors that led the hiring growth in May 2023. Kolkata, Mumbai and Ahmedabad recorded the highest growth in real estate and banking jobs. To top it, the banking and auto sectors led the hiring spree for non-metros, too.
Interestingly, three of the top five private banks that have shared headcount data also topped their total employee base by around 11,000 people in the first three months of the new calendar year. While comparative data for ICICI Bank, Kotak Mahindra Bank and IndusInd Bank were not available, HDFC Bank, Axis Bank and Yes Bank had disclosed their net additions.
This also shows that large NBFCs are almost hiring in tandem with their banking sector counterparts and so the BFSI sector as a block is on a strong hiring spree. This has added a much-needed boost to the domestic job market even as the IT sector plays the wait-and-watch game on how things unfold in the West.
The lending sector at large has shown a strong inclination to add to their headcount right at the beginning of this new calendar year even though most of the firms have been hiring through the last financial year.
With the spectre of high inflation taking a breather, it could lead to a positive business sentiment and companies could embark on a capex cycle that would further boost demand for finance and the need to hire people to manage the demand. This should add to the ebullience of the job market that has been looking at an alternative channel to pull up in the wake of a temporary shock to the tech companies.
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