Recast loans from non-bank lenders could double by year-end: report


Restructured assets of non-bank lenders are expected to double to 3.3% by March 2022, largely due to the impact of the second wave of the pandemic, according to a report on Monday.

The same ratio stood at 1.6% in March 2021, after the first wave of the pandemic. The pandemic had led the Reserve Bank of India (RBI) to make an exception by launching a loan overhaul facility for borrowers affected by COVID-19.

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Rating agency ICRA said the restructured portfolio for NBFCs (non-bank financial corporations) is expected to be 4.1-4.3 percent in March 2022 (up from 2.2 percent in March 2021), while ‘it is expected to be 2.0 to 2.2 percent for housing finance companies (up from 1.0 percent in March 2021).

The second wave of coronavirus infections impacted the nascent recovery in non-bank collections seen in the third quarter of fiscal 2021 and the fourth quarter of fiscal 2021, affecting the cash flows of the underlying borrowers and thus prolonging the recovery process, the agency said.

Its vice president AM Karthik said the nature of the underlying stock governed the higher incidence of NBFC overhauls, compared to housing finance companies (HFCs) that have mortgages.

“The target segment of borrowers also plays a key role since a significant proportion of restructuring has been observed in the smallest entities (assets under management below 5,000 crores).

“Borrowers supported by these entities would have a relatively higher risk profile, also characterized by higher returns, which exposes them to increased vulnerabilities in a down cycle or a stressed scenario,” he said. added.

Auto, SME (small and medium-sized enterprises) and personal loans, which accounted for the bulk of NBFC credit, have faced asset quality pressures over the past year. While entities with a significant share of new and heavy and medium commercial vehicles experienced more restructuring, and the same was modest for other segments like cars, two-wheelers and tractors.

Meanwhile, her counterpart Crisil said the liquidity coverage of the NBFCs she rated had improved from a year ago, putting them in a better position to service short-term debt. which will cushion the impact of the pandemic.

This trend is a change from last year, when fears over asset quality and liquidity escalated after a moratorium on repayments and strict lockdowns affected collections.

Collections were again affected in the current fiscal year by the second wave, and the decline was more pronounced in May (sequentially) as containment measures in most parts of the country were only applied to the end of April, the rating agency said. .

Factors supporting NBFC liquidity measures include fundraising through special government programs, improved collections in the second half of fiscal 2021, and limited disbursements, he said.

This story was posted from an agency feed with no text editing.

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