Negative outlook for NBFC maintained

Mumbai, Ta. 25 September 2020, Friday

The negative outlook for non-banking finance companies (NBFCs) and housing finance companies (HFCs) has been maintained for the last six months of the current financial year, India Ratings said.

Growth in NBFCs' asset under management will remain steady, which was earlier projected at 5 to 10 per cent per annum. In addition, the rate for HFCs will be lower in single digits.

"We maintain a negative outlook for NBFCs and HFCs due to trade disruptions caused by Kovid-18," the agency said in a report.

Given the way the virus is spreading across the country, it will take a long time for NBFCs to return to normal. The liquidity and funding environment for companies with good ratings has improved since July, however, the issue of asset quality which continues to affect profitability in the current financial year and beyond will continue.

Capitalization of these sectors is at a practical level as credit growth is slow, which will allow them to absorb the modest strain of asset quality. NBFCs are currently focusing on the collection.

The Reserve Bank has allowed lenders to restructure the loans they have released. Restructuring of loans for NBFCs will be seen in high single digits.

Loans in segments such as commercial vehicles, real estate loans and large loans to SMEs were also under more pressure, the report said.