Asset quality of Indiabulls Hsg Fin, IIFL Finance vulnerable: Moody's

Asset quality at non-bank lenders IIFL Finance and Indiabulls Housing Finance is "vulnerable" due to the economic contraction, global rating agency Moody's Investors Service said on Monday. The agency said Muthoot Finance the third non-bank finance company it rates is better positioned because of its focus on the gold loans business.

Loan collections have shown an improvement for all the three NBFCs despite the six-month loan repayments moratorium ending in August on a pick-up in economic activity, but "asset quality at IIFL Finance and Indiabulls is vulnerable to economic contraction", it added.

Till now, various types of support measures for borrowers from authorities have prevented a sharp deterioration of asset quality at the lenders, it added.

"However, we expect delinquencies will eventually increase at IIFL Finance and Indiabulls once the support programs end given the severity of the pandemic's impact on India's economy," the agency said. A modest loan growth and loan sales will help IIFL and Indiabulls maintain capitalisation despite the weakening of profitability, which will be hurt by credit costs for the loan losses, it noted.