CRISIL said in a report that the gross non-performing assets (GNPAs) of non-bank lenders is expected to increase by 25-300 basis points depending on the asset class following the recent clarifications on income recognition, asset classification and provisioning (IRAC) norms . Monday.
“After facing several challenges in the last three financial years, the AUM of NBFCs and housing finance companies (HFCs) is set to grow 8-10 per cent in the next financial year, riding on two tailwinds – improving economic activity, and Strengthening the balance sheet buffer,” the agency said.
Its managing director Gurpreet Chhatwal said that many NBFCs have created high liquidity, capital and provision buffers in the recent past.
“This, along with improving economic activity, puts them in a comfortable position to capitalize on growth opportunities,” he said.
Retail loans are expected to see reasonably broad-based growth in the current and next fiscal, supported by a pick-up in demand and consequent underlying sales, the report said.
Gold, home and unsecured loans should have the fastest growth rate.
On the other hand, wholesale lending will continue to decline as platforms such as alternative investment funds acquire currency.
Change in RBI’s stance on asset quality NPA The agency said the accreditation norms would be affected on a daily due date basis instead of month-end.
“We expect the GNPA to increase by 25-300 bps depending on the asset class due to the new recognition criteria.”
While home loans and gold loans will be the least affected, unsecured, and loans to micro, small and medium enterprises will bear the brunt.
However, the increase in GNPA due to the revised recognition norms will largely have an accounting effect, as the credit profile of borrowers is not expected to deteriorate, considering the recovery in the economy, it said.
As a result, the final credit loss report is not expected to change significantly.
Overall, fragile assets (due to impact of GNPA+ regulatory norms and slippage from the restructured book) are seen at Rs 1.3-1.6 lakh crore, which is equivalent to 5-6 per cent of the industry’s AUM as of March 2022, the agency said. Is. ,
However, this does not affect the impact of the third wave of covid-19, especially the just discovered omicron variant, which is a risk factor.
Krishnan Sitaraman, senior director and deputy chief rating officer of the agency, said, “While there may be apprehensions about the reported GNPA, additional disclosures about the underlying crime profile and collection capacity by NBFCs may help allay them. ”
Those with low leverage, high liquidity and strong parentage are expected to benefit from better funding access at optimum rates, he added.
Sitharaman said that for the rest, and especially medium-sized and small players, co-lending, securitization, or other partnerships with banks would facilitate a funding-lite business model.