NBFC's liquidity pull is expected to continue even at lower interest costs

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New delhi date. 29 November 2019, Friday

Fitch Ratings speculates the liquidity pull facing non-banking finance companies (NBFCs) after the IL&FS chapter. Liquidity drag is unlikely to slow down even as interest costs go down.

We expect wholesale and housing finance companies (HFCs) to be weaker. "We have come to this point in view of high leverage, asset and poor maturity profiles," a report by Fitch said.

Large retail finance companies with strong maturity profiles of assets and liabilities will not mind getting funding from markets and banks. Compared to previous years, leasing companies in India from finance will grow at a slower pace. Due to the economic downturn and liquidity pull, this will slow down.

To reduce the impact of low growth rates, increasing competition will affect profitability and weaken risk interest. This will affect the growth rate of loans, including business loans and commercial vehicle loans, said Fitch.

The impact of the weak auto sales figure has been seen on the growth of auto loans and this effect will continue. The prolonged downturn in the real estate sector will affect the financing of the construction sector.

Due to low credit expansion and high exposure to rural areas where credit competition with banks is very low, the growth rate of small-scale consumer loans will be higher than the overall rate of industry.

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