Stricter standards for loans under stress will increase NBFC's NPAs

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MUMBAI: The non-performing assets (NPAs) of non-banking finance companies (NBFCs) are expected to increase by 120 to 150 basis points in the current financial year, from 3.50 per cent to 8.50 per cent, due to stricter standards and upgrades for loans under stress.

In the case of housing finance companies, the NPA is expected to rise by 20 basis points to 8.50 per cent, according to an ICRA report.

The report takes into account the risk of new NPAs coming from revised standards and restructured books. At the end of March 2012, the gross NPA of NBFCs was 2.50 per cent, while for housing finance companies, the figure was 5 per cent.

In addition, NPA accounts can be upgraded to standard assets only after each outstanding amount has been repaid, the report said.

Limitations in upgrading and stricter NPA standards will increase NPAs.

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