NBFIs to face liquidity, asset quality risks in near term: Fitch Ratings

Fitch said cash flow implications of the moratorium, which the RBI has extended to end-August, have not been uniform across the industry, affecting liquidity profiles of some NBFIs more materially and placing pressure on their ability to repay or refinance upcoming obligations.

PTI

July 02, 2020 / 14:21 IST

The non-banking financial institutions will continue to face elevated liquidity and asset quality risks in the near term even as the economic activity picks up with easing of lockdown restrictions, Fitch Ratings said on Thursday.

These risks reflect the impact of the coronavirus pandemic on borrowers' repayment capabilities, as well as the effects of the moratorium on collections, it said.

Fitch said cash flow implications of the moratorium, which the RBI has extended to end-August, have not been uniform across the industry, affecting liquidity profiles of some NBFIs more materially and placing pressure on their ability to repay or refinance upcoming obligations.

“We expect near-term inflows to remain below pre-pandemic levels and to improve only gradually as economic activity gathers pace,” it said.

Fitch said the moratorium will erode payment discipline and its extension will result in lagged asset-quality problems for non-banking financial institutions (NBFIs), particularly when combined with the economic damage from the pandemic and lockdown.

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