NBFCs' collection efficiency to remain strong, says ICRA

The collection efficiency of non-banking financial companies (NBFCs) is expected to remain robust and rate hikes are unlikely to have a significant bearing on it, ratings agency ICRA said on February 9.

The ICRA release comes a day after the Reserve Bank of India raised the repo rate, the rate at which the central bank lends funds to banks, by 25 basis points to 6.5 percent, which will push up home loan EMIs.

Attributing the growth to the strong outlook for the majority of sectors, ICRA said the impact of the uncertain global environment is difficult to ascertain at present.

"For pools carrying interest rate risks, typically housing loan and loan against property pools, the continuation of rate hikes will not have a significant bearing on the collection efficiencies, given the association of the borrower with the underlying collateral (residential properties) and the priority given by borrowers to repay such loans," the release said.

Abhishek Dafria, Vice President and Group Head-Structured Finance Ratings, ICRA said collections across retail pools were expected to remain steady over the near to medium term "should there be no material macro or business-related disruptions”.

Earlier, the collection efficiency for NBFCs and housing finance companies (HFC)s has been healthy in the range of 97 to 105 percent till December 2022.

"This was supported by improved economic activity, a favourable operating environment and non-banks (i.e NBFCs and HFCs) returning to normalcy after two years of interrupted operations during the pandemic," the release said.