The loan growth will also be supported by further relaxation of vehicle import restrictions imposed since 2020 to preserve the country’s foreign reserves.Economic growth turned positive from 4Q23 following six quarters of contraction, and monetary conditions have eased significantly.

The normalisation in inflation and interest rates amid a revival of economic activities has boosted FLCs' credit demand, particularly in the key vehicle-financing segment. FLC sector loan growth expanded by an estimated 9.6% yoy in 1QFY25 (FY24 estimate: 2.2%).

Fitch Ratings expects asset quality to improve further on recovering borrower repayment capacity and FLCs’ focus on loan recoveries. The industry's 90 days past due non-performing loan ratio