Moneycontrol PRO
UPCOMING EVENT:Attend Traders Carnival Live, 3 days 12 sessions. Early bird offer ending soon Rs.999/-, exclusive for Moneycontrol Pro subscribers. Register now!
you are here: HomeNewsBusiness

NBFCs may see up to 6% slippages from restructured book, says ICRA

Non-banks could see growth reviving in fiscal year 2021-2022 to about 7-9 per cent compared with a flattish performance in the current fiscal year.

January 06, 2021 / 05:20 PM IST

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.


COVID-19 Vaccine

Frequently Asked Questions

View more
How does a vaccine work?

A vaccine works by mimicking a natural infection. A vaccine not only induces immune response to protect people from any future COVID-19 infection, but also helps quickly build herd immunity to put an end to the pandemic. Herd immunity occurs when a sufficient percentage of a population becomes immune to a disease, making the spread of disease from person to person unlikely. The good news is that SARS-CoV-2 virus has been fairly stable, which increases the viability of a vaccine.

How many types of vaccines are there?

There are broadly four types of vaccine — one, a vaccine based on the whole virus (this could be either inactivated, or an attenuated [weakened] virus vaccine); two, a non-replicating viral vector vaccine that uses a benign virus as vector that carries the antigen of SARS-CoV; three, nucleic-acid vaccines that have genetic material like DNA and RNA of antigens like spike protein given to a person, helping human cells decode genetic material and produce the vaccine; and four, protein subunit vaccine wherein the recombinant proteins of SARS-COV-2 along with an adjuvant (booster) is given as a vaccine.

What does it take to develop a vaccine of this kind?

Vaccine development is a long, complex process. Unlike drugs that are given to people with a diseased, vaccines are given to healthy people and also vulnerable sections such as children, pregnant women and the elderly. So rigorous tests are compulsory. History says that the fastest time it took to develop a vaccine is five years, but it usually takes double or sometimes triple that time.

View more

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.
Moneycontrol News
first published: Jan 6, 2021 05:20 pm

stay updated

Get Daily News on your Browser
ISO 27001 - BSI Assurance Mark