Budget 2016: Reports suggest that Large NBFCs are likely to grow at 14 per cent in financial year 2016-17, with SME/MSME growing faster than commercial vehicles, keeping this in mind, the NBFC sector needs to be provided adequate policy support in the Budget to help meet the growing financing needs of the economy to support the Digital India and Make in India initiatives from the Government.
Furthermore, in the Budget for FY16 NBFCs with an asset size in excess of Rs. 5 billion would be permitted access to the provisions of the Sarfaesi Act, which once implemented would improve NBFC ability to make recoveries from immovable asset financing, such financing constitutes around 18 per cent of NBFC retail credit, largely in the mortgage segment.
NBFC could witness increase in cost of funds in second half of 2016 with tightening of the investment limits. This could have an impact on the bottom line numbers and profitability of NBFCs to remain under pressure with migration to more stringent NPA recognitions.
By Kavi Arora, Managing Director & CEO, Religare Finvest Limited