NBFC disbursement to dip by 50-60% in Q1FY22, bad loans set to rise: Icra

The disbursements by non-banks--finance and housing companies--is likely to decline by 50-60 per cent in the first quarter ended June 2021 amid restrictions imposed through lockdown to contain spread of Covid-19 pandemic. However, the sector is expected to post a healthy revival in the latter part of the year, according to rating agency Icra.

The sectoral Asset Under Management (AUM) growth is pegged at 7-9 per cent for FY2022 vis-a-vis four per cent in FY2021. The low base and growth in disbursement of 6-8 per cent to support AUM growth.

Rating agency said in a statement that pressure on asset quality will manifest as a 50-100 basis-point increase in non-performing assets (NPAs). The write-offs could remain higher and similar to the last fiscal in the base case scenario.

The demand for restructuring would go up this fiscal because of prolonged stress in the operating environment and non-availability of any blanket forbearance such as loan moratorium. In FY21, RBI had given a six-month moratorium (March-August 2020). The restructuring in the last fiscal was about 1.5 per cent of the sectoral AUM.

A M Karthik, Vice President, Financial Sector Ratings, Icra says that about 30 per cent of the non-bank exposure is deemed to be in the risky segments like real estate, personal credit, microfinance and unsecured Small and Medium Enterprises. The segments of commercial vehicle and passenger vehicle financing exposure are also seen as risky as they were more severely affected by the pandemic.

The reported Gross NPAs as of March 2021 were lower than anticipated, as loan write-offs spiked. The write-offs as a proportion of AUM were about 70 bps higher for FY2021 over the previous year. The provision buffers carried by non-banks are about 100 bps higher than pre-covid levels, it added.