NBFCs' gross NPA ratio rises from 6.1% to 6.3% in Sept: RBI report

Non-bank lenders witnessed stress in their asset quality in the first half of the current fiscal, with gross NPA ratio increasing to 6.3 per cent in September 2019 from 6.1 per cent in March, according to an RBI report.

However, the net NPA ratio of non-banking financial companies (NBFCs) remained steady at 3.4 per cent between end-March 2019 and end-September 2019, RBI's Financial Stability Report showed.

As at end-September 2019, the capital to risk assets ratio (CRAR) of the NBFC sector stood at 19.5 per cent, lower than 20 per cent as at end-March 2019.

The report said while the importance of NBFCs in credit intermediation is growing, the IL&FS episode brought the focus on the asset liability mismatches of non-bank lenders, which poses risks to the sector as well as the financial system as a whole.

To address this, the RBI introduced the liquidity coverage ratio (LCR) requirement for all deposit-taking and non-deposit taking NBFCs with an asset size of Rs 5,000 crore and above.

The new regulation mandates NBFCs to maintain a minimum level of high-quality liquid assets to cover expected net cash outflows in a stressed scenario.

NBFCs are required to reach LCR of 100 per cent over a period of four years commencing from December 2020.

"The non-banking financial intermediation space which took up a significant share in credit intermediation after the relative passivity of public sector banks due to their impaired balance sheets, continues to show signs of restructuring of their underlying business models," RBI Governor Shaktikanta Das wrote in the foreword of the report.

While credit markets are becoming more competitive following recapitalisation of state-run banks, market funding for NBFCs is getting more discerning based on prudential concerns, he added.

The report said NBFCs were the largest net borrowers of funds from the financial system with gross payables of around Rs 8,29,468 crore and gross receivables of around Rs 66,635 crore as at end-September 2019.

A further breakup of payables showed that 48.4 per cent of the funds were obtained from banks, followed by 26 per cent from mutual fund companies and 21.3 per cent from insurance firms, it said.