Rating agency ICRA on January 6 said slippages from the restructured book of non-banking finance companies (NBFCs) is estimated at 4-6 percent of their total loans. This will keep the overall stressed assets of NBFCs elevated in FY2022 after an increase of up to 200 bps in FY2021, the agency said.
“This is after considering that entities, especially those having retail exposures, would prefer to write-off sticky overdues, in view of the provision build-up, adequate earning performance and their comfortable capital structures,” the rating agency said in a note on Wednesday.
Collection efficiency, notwithstanding the improvement since April 2020, remains about 5-15 per cent lower than the pre-covid-19 levels, thereby exerting pressure on their current asset quality. While part of the stress could get restructured, slippages would increase in H2FY2021, Icra said citing a survey.
The rating agency said it did a survey across non-banks, involving about 60 entities, which together account for over 50 percent of the sectoral AUM and about 23 investors.
As per the survey, about 90 percent of the investors expect the NPAs to increase by about 100-200 bps by March 2021 vis a vis 40 per cent of the issuers. Further, another 40 per cent of the issuers expect the NPAs to remain stable vis a vis March 2020 levels, Icra said.
NBFCs may see growth picking up
However, ICRA said the growth of non-banks could revive in fiscal year 2021-2022 to about 7-9 per cent compared with a flattish performance in the current fiscal year.
Some of the key segments which would bolster growth include gold loans, home loans, personal credit, rural finance and microfinance, said A M Karthik, Vice President, Sector-Head Financial Sector Ratings, ICRA.
“Growth in the vehicle finance, business loans including loan against property and other commercial lending segments, which are closely linked to the economic activities are expected to take longer to register a reasonable revival,” Karthik said.
More HFCs expect a higher growth rate vis a vis NBFCs and, smaller and mid-sized entities expect higher growth rate vis a vis their larger peers, the agency said.
Further, non-banks would require additional funding lines of about Rs.1.9 lakh crore- Rs 2.2 lakh crore, apart from the refinance of the existing lines, to achieve the above-mentioned growth in FY2022, Icra said.
“Growth would be contingent upon the access to adequate funding lines –incremental bank loans to non-banks, considering their high sectoral exposure to the segment, remains to be seen and would in-turn depend on overall bank credit growth,” the agency said.