NBFCs’ asset quality a concern, says Crisil

Apr 17 2014, 12:32 IST
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SummaryNon-banking finance companies (NBFCs) are expected to report a growth rate of 16-18% in their loan books over FY13-15...

Non-banking finance companies (NBFCs) are expected to report a growth rate of 16-18% in their loan books over FY13-15, but the asset quality of some players may remain under stress, Crisil Research said in a report on Wednesday. By the end of FY15, NBFCs’ loan portfolio is likely to be near R14 lakh crore.

Though healthy, the growth in NBFCs will be slower than the historical average due to tough macroeconomic conditions and a strict regulatory approach, the report stated.

Between FY10 and FY13, these companies grew at a CAGR of 25%, with the growth largely supported by a rise in loans towards sectors like auto, loans, commercial vehicles and commercial equipment.

Thanks to this, NBFCs have gained market share over the last few years. The contribution of NBFCs to overall credit in the system stood at 15.7% as on March 31, 2013, the report noted, against 14.7% at FY07-end.

“We believe that domain-specific expertise of these NBFCs has enabled them to tap the credit demand in these segments,” analysts from Crisil Research said.

In terms of asset quality, these companies have seen either stable or higher non-performing assets (NPAs) across segments, with only the auto finance segment showing a reduction of 130 bps in gross NPAs since FY10. “However, in FY14, the trend has reversed with auto finance witnessing a sharp increase in GNPAs, while they have declined or remained steady for others,” the analysts said.

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