The restructured assets of non-bank lenders will double to 3.3% by March 2022, mainly due to the impact of the second wave of the pandemic, according to a report released on Monday.
The same ratio was 1.6 percent as of March 2021 after the first wave of the pandemic. The pandemic has prompted the Reserve Bank of India (RBI) to make an exception by launching a credit change mechanism for borrowers affected by COVID-19.
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The ICRA rating agency said that the restructured ledger for NBFC (non-bank financial companies) is expected to be 4.1-4.3% by March 2022 (versus 2.2% in March 2021), while it is expected that the same will be 2.0-2.2%. percent for housing finance companies (versus 1.0 percent in March 2021).
The second wave of coronavirus infections affected the prospective recovery in non-bank fees seen in the third quarter of fiscal 2020 and the fourth quarter of fiscal 2020, affecting the cash flow of major borrowers and thereby further delaying the recovery process, the agency said.
Vice President AM Karthik said the nature of the underlying security has led to more frequent reuse of NBFCs compared to home finance companies (HFCs) that have mortgages.
“The target borrower segment also plays a key role as a high proportion of restructuring was observed in smaller companies (assets under management less ₹Rs 5,000).
“Borrowers served by these institutions will have a relatively higher risk profile as well as higher returns, which exposes them to increased vulnerability in a downturn or stress scenario,” he added.
Vehicles, SMEs (small and medium enterprises) and personal loans, which accounted for the bulk of NBFC’s credit, have faced pressure related to asset quality during the last fiscal year. While companies with a significant share of new, heavy and medium commercial vehicles have undergone higher restructuring, the same has been modest for other segments such as passenger cars, two-wheelers and tractors.
Meanwhile, its counterpart Crisil said its rated NBFCs have improved liquidity coverage over last year, putting them in a better position to service debt in the near future, which will mitigate the impact of the pandemic.
This trend is in contrast to last year, when concerns over asset quality and liquidity intensified after a payout moratorium and stringent restrictions affected fees.
According to the rating agency, fees in the current fiscal year were again impacted by the second wave, and the decline was more pronounced in May (sequentially), as containment measures were taken in most regions of the country only in the second half of April.
The factors supporting the NBFC’s liquidity measures include fundraising through special government schemes, improved collection in the second half of fiscal 2021 and limited disbursements, the report said.
This story was published from the news agency tape without text changes.
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