Shares of non-bank finance companies gained on February 16 after the central bank gave more time to NBFCs to comply with its new rules for upgrade of non-performing assets (NPAs) to standard ones.
The Reserve Bank of India (RBI) on February 15 extended the deadline for adhering to the rules from March 31 to September 30.
The new guidelines issued late last year had asked non-bank lenders to upgrade bad loans to standard assets only after all interest dues and principal outstanding are repaid across credit facilities.
The new rules are widely expected to deteriorate the asset quality of NBFCs as reflected in the earnings in the quarter ended December. Housing Development Finance Corporation, which has implemented the new guidelines, saw its gross NPA ratio rise to 2.32 percent in the December quarter from two percent in the previous quarter.
M&M Financial Services had guided investors that it may take management overlay provisions of Rs 500 crore to Rs 1,500 crore in the March quarter to comply with the new guidelines. Brokerage firm Morgan Stanley India reportedly said that the company may no longer need such provision after the extension of the deadline.
Shares of M&M Financial were the top gainer on the Nifty Financial Services index, rising nearly eight percent to Rs 165.30 on the National Stock Exchange.
Similarly, shares of Shriram Transport Finance, Muthoot Finance, Power Finance Corporation, HDFC, Piramal Enterprises, and Bajaj Finance were up 0.3-4.5 percent.
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