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    NBFC delinquencies could see up to 250 bps spike this fiscal: Crisil

    Synopsis

    The rapid increase in Covid-19 afflictions and intermittent lockdowns will increase asset quality challenges of non-banking financial companies already grappling with the economic slowdown since last fiscal, estimates Crisil ratings.

    Rising ShuttAgencies
    The rapid increase in Covid-19 afflictions and intermittent lockdowns will increase asset quality challenges of non-banking financial companies already grappling with the economic slowdown since last fiscal, estimates Crisil ratings. The trend in monthly collection efficiency till August 31, 2020 (unadjusted for moratorium) shows there is still some way to go before reaching pre-pandemic levels, the rating agency assessed. While the recent restructuring scheme afforded by the Reserve Bank of India would be a leash on reported non-performing assets, the pace of normalisation and ultimate credit losses would be key parameters to track.

    “Loan delinquencies of NBFCs could dart up 50-250 basis points this fiscal, depending on the segment of operation because of vulnerability in borrower cash flows,” the rating agency said. “This is a base-case estimate without factoring in loan restructuring and the Covid-19 affliction curve.” Financial system loans under moratorium fell to 25% for the June-July period due to resumption in business activities, research by Acuité Ratings has shown. The Reserve Bank of India’s bi-annual financial stability report had said that system wide moratorium levels were at 50% at the end of April.

    The RBI announced a three-month moratorium in March along with a freeze on rating action on customers availing the relief. That was subsequently extended by another three months to August. “While there has been an improvement across segments over the past four months, collections in the wholesale, MSME and unsecured segments are still much lower than before the pandemic,” said Krishnan Sitaraman, Senior Director, CRISIL Ratings. “Now that the moratorium has ended, self-employed borrowers are likely to be impacted more because of slow resumption of economic activity and continued local restrictions. On the other hand, the salaried borrower segment will be more resilient despite pay cuts and job losses.”


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