Credit assessor, India Ratings and Research, in its report has underscored that bad loan across major non-banking financial companies (NBFCs) would peak by March 2015, despite the ease in asset quality pressures by second half of fiscal year 2015. According to the rating agency, the gross non-performing assets (NPAs) of major Indian NBFCs, will hit 4.2% of their total assets by March 2015, compared with 2.5% in March 2013. Nevertheless, the ratings agency has kept the outlook of NBFC sector stable in 2014.
The agency expects the revival of certain infrastructure projects (cleared by the cabinet committee in recent months), pick-up in industrial growth and corporate capex investments to benefit most of the commercial assets financed by the NBFCs, from second quarter of FY15 onwards. It, however noted that NBFC’s new business growth would remain subdued till third quarter of FY15, as it would require a longer period of sustained growth in the index of industrial production.
However, it also pointed that in a scenario of continued weak industrial growth and infrastructure projects remaining stalled, the asset quality pressures could intensify and adversely impact the NBFCs with large unseasoned portfolios.
It further, highlighted that NBFCs’ defenses, in the form of solid pre-provision operating profit (PPOP) and capital buffers offer a strong cushion against India Ratings’ stress tests on scenarios of spike in credit costs and elevated funding costs. Recently, in a report, India Ratings highlighted that stressed loans across Indian banks are likely to increase to 14% of total loans by March 2015 from 9 % in March 2013.
The agency expects the revival of certain infrastructure projects (cleared by the cabinet committee in recent months), pick-up in industrial growth and corporate capex investments to benefit most of the commercial assets financed by the NBFCs, from second quarter of FY15 onwards. It, however noted that NBFC’s new business growth would remain subdued till third quarter of FY15, as it would require a longer period of sustained growth in the index of industrial production.
However, it also pointed that in a scenario of continued weak industrial growth and infrastructure projects remaining stalled, the asset quality pressures could intensify and adversely impact the NBFCs with large unseasoned portfolios.
It further, highlighted that NBFCs’ defenses, in the form of solid pre-provision operating profit (PPOP) and capital buffers offer a strong cushion against India Ratings’ stress tests on scenarios of spike in credit costs and elevated funding costs. Recently, in a report, India Ratings highlighted that stressed loans across Indian banks are likely to increase to 14% of total loans by March 2015 from 9 % in March 2013.
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