In its report on performance review of retail NBFCs and industry outlook, Icra says the total retail managed credit for these companies stood at R2.96 lakh crore at the end of March 2012. The entire credit portfolio was distributed across commercial vehicles (29%), gold loans (17%), mortgage loans (16%), construction equipment (10%), cars (15%), unsecured loans (8%) and tractor loans (3%).
This proportion could undergo some shift because of slowdown in vehicle sales and in gold loans and continued expected growth in the mortgage segment, Icra said.
The adverse business environment is likely to hit the asset quality of NBFCs as gross non-performing assets (NPAs) are expected to worsen further by the end of the financial year due to delinquencies in the commercial vehicle, construction equipment, small and medium enterprises lending and capital market funding. Gross NPAs for the NBFC industry stood at 1.56% at the end of the previous financial year.
The NPA recognition changes, prescribed in the draft guidelines for NBFCs by Reserve Bank of India on the basis of the Usha Thorat Committee report, will hurt the profitability of NBFCs by 15-20 basis points over the medium term, Icra said.
The proposed RBI revision, if implemented, will require NBFCs to recognise an account as NPA if not serviced for over 90 days. This is a much smaller time duration than the current 180 days offered to these companies.