New RBI norms likely o affect NBFCs' return on asset: Crisil
"We believe that tightening in bad asset recognition norms to 90 days from 180 days and the increased standard provisioning requirement to 0.40 per cent from 0.25 per cent will adversely affect the profitability of NBFCs. As a result, the return on asset is expected to drop by 0.25 per cent over the next two-three years," Crisil Ratings senior director Pawan Agrawal said in a note.
The hit on bottomlines will be primarily due to higher provisioning requirements on account of increase in standard asset provisioning and revision in recognition norms for bad assets, he said.
"The new guidelines will enhance the systemic stability of NBFCs and enhance lender confidence in them. We also believe NBFCs will be able to smoothly transit to the tighter regulatory requirements, given the adequate time frame provided by RBI," Crisil director Suman Chowdhury said.
Yesterday, the Reserve Bank issued the draft guidelines based on the Usha Throat committee report on NBFCs.
The new norms envisage, among others, prior RBI nod for making changes in ownership control and management for large NBFCs, apart from making it mandatory for all deposit-taking NBFCs to obtain credit rating apart from making it mandatory to get RBI nod to appoint CEOs for NBFCs with asset size of Rs 1,000 crore and
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