Non-bank financial companies are expected to see a normalization in their business activities in the 2022-23 financial year, barring any negative events, India Ratings and Research said on Friday.
NBFCs would maintain loan growth of around 14% year-on-year in the next fiscal year, with growth in the current fiscal year around 7-8%, he added.
“NBFCs would start the year with sufficient capital reserves, stable margins and strong balance sheet provisioning, while adequate system liquidity would facilitate funding. Nonetheless, an expected increase in systemic interest rates and asset quality issues in some segments due to the lagged impact of the pandemic would be a drag on operating performance,” he said in his outlook for the area.
The agency maintained a neutral sector outlook and a stable rating outlook for NBFCs for 2022-23.
“Fiscal 23 could be a year of normality in disbursements,” he said, adding that products such as home loans, housing loans and vehicle finance could see higher demand than unsecured personal and commercial loans which have seen higher demand during the pandemic.
The gold lending segment could see moderate growth along with gold prices, as well as opening up other funding avenues for borrowers.
NBFC Stage 3 assets could drop from 5.6% in the fiscal third quarter to 6% by 2022-23, the agency predicted. This would be mainly due to the slippages of the restructured book and backed by the emergency line of credit guarantee program, he said. However, the impact on the cost of credit is expected to be moderate as NBFCs have created adequate provisioning reserves.
A rise in interest rates would impact additional borrowing funding costs between lenders, India Ratings and Research said.
“Existing liquidity on the balance sheet would help maintain funding costs for some quarters,” he added, but noted that the cost of additional borrowing is likely to increase for all capital market instruments.
February 25, 2022