Non-bank lenders' non-performing asset ratios will slip by up to 1 percentage point and the ratio of the loans recast will double to 3.3 per cent in FY22, domestic rating agency Icra said.
It attributed the asset quality impact largely to the reverses of the second wave of the pandemic, which has hit the collection efficiencies for the non-bank finance companies (NBFC) and housing finance companies (HFCs).
With the abatement of the pandemic and the resumption in business activity, the collections are improving and will offer some succour to the financiers as the fiscal year progresses, it said, adding that it has a "negative" outlook on the sector.
"Notwithstanding the near-term pressures, the net increase (adjusting for write-offs) in the 90+ dpd (days past due) in the current fiscal is expected to be about 0.50-1 per cent. ICRA draws comfort from the provisions maintained by the entities, which continue to remain about 1 per cent higher than the pre-Covid levels," its vice president for financial sector ratings A M Karthik said.
The agency classified nearly a third of the overall non-bank exposures of Rs 24 lakh crore as being in "high risk category", flagging microfinance, personal credit, unsecured SME, real estate finance as the ones at highest risk and gold and housing at the lowest risk.
From a loan restructuring perspective - the second window provided by the RBI following the second wave ends in September - it expects the overall restructuring to come at between 3.1-3.3 per cent as of end-FY22 from the 1.6 per cent in FY21 end.
The restructured book for the NBFCs is expected to move up to 4.1-4.3 per cent by March 2022 while the same for the HFCs is estimated to go up to 2.0-2.2 per cent, it said.
Apart from the delinquencies and restructuring, the non-bank lenders will also have to up the write-offs in FY22, it said, adding that the overall quantum on this will move up by 0.60 per cent to 1.6 per cent of the overall assets.
From an asset growth perspective, the growth will come at between 7-9 per cent, which is higher than 4 per cent attained in FY21 but way below the over 15 per cent growth achieved prior to facing troubles before the pandemic.
The elevated levels of credit cost will keep profitability subdued in the current fiscal and the bottomlines are expected to improve only in FY23, the agency said.
The credit cost could moderate in the next fiscal, provided there are no new surges in the infection rates, Karthik said.
The agency said the sector will be requiring additional funding of Rs 2 lakh crore during the fiscal, it said.
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