The latest study report released by credit rating agency, Crisil, reveals a sharp decline in the disbursement levels of non-banking financial companies (NBFCs) in the past two months, as they have focused on repaying their maturing short-term obligations to the mutual funds.
The report finds that the decline in disbursements of NBFCs is as high as 70% in one case, with the average at around 50% for Crisil-rated NBFCs, pointing to the severity of the business shrinkage.
Roopa Kudva, CEO, Crisil said, “Despite increased delinquencies in NBFC portfolios, cash flows from existing assets will allow maturing debt obligations to be met on time. However, the decline in business volume will mean a further marginalisation of the sector, a trend that has been accelerating over the past few years as banks have taken over the traditional NBFC stronghold of retail lending.”
The study also reveals that NBFCs’ balance sheets have a significant asset-liability mismatch as more than 50% of their borrowings have maturities of less than one year, while most of the assets have tenures of about three years.
A study of the disbursement patterns of 33 rated NBFCs reveals that most of them, especially the asset finance companies, have significantly slowed down disbursements because of a lack of funds. Their average monthly disbursements during September and October are estimated to be half of the disbursements during August 2008.
NBFCs’ share in the overall retail finance space has also reduced over the past few years as banks have achieved dominance.