MUMBAI: Restructured assets of non-bank lenders are estimated to double to up to 3.3% by March 2022 largely because of the impact of the second wave of the pandemic, a report said on Monday.
The same ratio had stood at 1.6% as of March 2021, after the first wave of the pandemic. The pandemic had led the Reserve Bank of India (RBI) to make an exception by launching a loan recast facility for borrowers impacted by COVID-19.
Ratings agency ICRA said the restructured book for NBFCs (non-bank finance companies) is expected to be 4.1-4.3% as of March 2022 (as against 2.2% in March 2021), while the same is expected to be 2.0-2.2% for housing finance companies (as against 1.0% in March 2021).
The second wave of coronavirus infections has impacted the budding recovery in non-bank collections witnessed in Q3 FY2021 and Q4 FY2021, impacting the cash flow of the underlying borrowers and thereby further prolonging the recovery process, the agency said.
Its Vice-President A M Karthik said the nature of the underlying security governed the higher incidence of recasts for NBFCs, as against the housing finance companies (HFCs) which have home mortgages.
“The target borrower segment also plays a key role as a high share of restructuring was observed in smaller entities (assets under management of less than ₹5,000 crore).
“Borrowers catered by these entities would have a relatively higher risk profile, also characterised by higher yields, which exposes them to increased vulnerabilities in a downcycle or a stressed scenario,” he added.
Vehicle, SME (small and medium enterprises) and personal loans, which accounted for the bulk of the NBFC credit, are faced with asset quality-related pressures during the last fiscal. While, entities with a sizeable share of new and heavy and medium commercial vehicles witnessed higher restructuring, and the same was modest for other segments like cars, two-wheelers, and tractors.
