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Stressed loans may rise to Rs 1.8 lakh crore; debt recast will limit reported GNPAs: report

Unlike previous crises, the current challenges on account of the pandemic impacted almost all NBFC asset segments.

By: ENS Economic Bureau | Mumbai |
February 17, 2021 12:41:10 am
As per a Crisil report, stressed assets of non-banking financial companies are expected to reach Rs 1,50,000-1,80,000 crore, or 6.0-7.5 per cent of the assets under management (AUM), by the end of the current fiscal. (Representational photo)

Stressed assets of non-banking financial companies (NBFCs) are expected to reach Rs 1,50,000-1,80,000 crore, or 6.0-7.5 per cent of the assets under management (AUM), by the end of the current fiscal, a Crisil report said.

The rating agency said the real estate segment is likely to report 15-20 per cent of the advances as stressed assets. As much as 9-10 per cent of vehicle loans and 9.5-10 per cent of unsecured loans are expected to become stressed, it said. The pandemic hit NBFCs at a time when they were already hit by the IL&FS and DHFL fiascos and struggling to return to normalcy.

Unlike previous crises, the current challenges on account of the pandemic impacted almost all NBFC asset segments. Operations were curbed the most in the April-June quarter, when disbursements and collections were severely affected by the hard-braking of economic activity, as per Crisil.

“The one-time Covid-19 restructuring window, and the micro, small and medium enterprises (MSME) restructuring scheme offered by the Reserve Bank of India (RBI) will limit the reported gross non-performing assets (GNPA), though,” it stated.

Crisil said collection efficiency has improved since then, but it’s still some way off pre-pandemic levels in MSME, unsecured and wholesale segments, given the volatility in underlying borrower cash flows. But some NBFCs have curtailed the impact on asset quality via better risk management and collection processes, it added.

“This fiscal has bought unprecedented challenges to the fore for NBFCs. Collection efficiencies, after deteriorating sharply, have now improved, but are still not at pre-pandemic levels. There is a marked increase in overdues across certain segments and players. Nevertheless, gold loans and home loans should stay resilient, with the least impact among segments,” said Krishnan Sitaraman, senior director, Crisil Ratings.

Alongside wholesale loans (dominated by real estate and structured credit), vehicle finance, MSME finance and unsecured loans have been in spotlight this year due to a rise in stressed assets.

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