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NBFCs' NPA ratios to slip by up to 1% in FY22.: ICRA

The restructured book for the NBFCs is expected to move up to 4.1-4.3 per cent by March 2022

Domestic rating agency ICRA in its latest report has said that Non-Banking Financial Companies’ (NBFC) non-performing asset ratios will slip by up to 1 percentage point and the ratio of the loans recast will double to 3.3 percent in FY22. It attributed the asset quality impact largely to the reverses of the second wave of the pandemic, which has hit the collection efficiencies for the non-bank finance companies (NBFC) and housing finance companies (HFCs). It said with the abatement of the pandemic and the resumption in business activity, the collections are improving and will offer some succour to the financiers as the fiscal year progresses, and added that it has a ‘negative’ outlook on the sector.

According to the report, notwithstanding the near-term pressures, the net increase (adjusting for write-offs) in the 90+ dpd (days past due) in the current fiscal is expected to be about 0.50-1 per cent. ICRA draws comfort from the provisions maintained by the entities, which continue to remain about 1 per cent higher than the pre-Covid levels. It classified nearly a third of the overall non-bank exposures of Rs 24 lakh crore as being in ‘high risk category’, flagging microfinance, personal credit, unsecured SME, real estate finance as the ones at highest risk and gold and housing at the lowest risk.

From a loan restructuring perspective – the second window provided by the RBI following the second wave ends in September – rating agency expects the overall restructuring to come at between 3.1-3.3 per cent as of end-FY22 from the 1.6 per cent in FY21 end. The restructured book for the NBFCs is expected to move up to 4.1-4.3 per cent by March 2022 while the same for the HFCs is estimated to go up to 2.0-2.2 per cent.