India Ratings sees NBFCs, HFCs AUM rising 10% in H2FY22; GNPAs to increase

By: |
November 17, 2021 3:50 AM

The rating agency said since the second wave of Covid-19, especially during the July-September period, the risk appetite in the system has reasonably improved led by strong corporate performance, better external conditions and sustained ultra-loose monetary policy conditions.

“Financing condition will remain conducive in 2HFY22, backed by the easy money conditions.“Financing condition will remain conducive in 2HFY22, backed by the easy money conditions.

Non-banking finance companies (NBFCs) and housing finance companies (HFCs) will likely see 10% year-on-year growth in assets under management in the second half of the current financial year (H2FY22), with a fall in disbursements, India Ratings and Research (Ind-Ra) said in a release on Tuesday.

The rating agency said since the second wave of Covid-19, especially during the July-September period, the risk appetite in the system has reasonably improved led by strong corporate performance, better external conditions and sustained ultra-loose monetary policy conditions. “Financing condition will remain conducive in 2HFY22, backed by the easy money conditions.

Easy money is a precursor for corporate capex (capital expenditure), especially in the aftermath of crisis. However, owing to the tepid domestic demand, large capex activities are still not visible, barring a few pockets,” the rating agency said.

Higher commodity prices will boost demand for working capital loans in H2FY22 and, thus, demand for short-term funds could rise. “…diversification in product lines supported by a wider product basket will be key for NBFCs and HFCs to sustain loan growth in a cyclical downturn. HFCs continue to see a demand uptick due to higher consumer affordability, backed by stamp duty cuts in few states, lower interest rates and reverse migration,” India Ratings said.

On the asset quality front, India Ratings expects gross non-performing asset ratio (GNPAs) of NBFCs to rise to 7.3% by the end of the current fiscal year from 6.8% in the April-June quarter. For housing finance companies, gross non-performing assets will likely rise to 3.8% by March-end from 3.6% in the quarter ended June, the agency said.

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