That’s 6% to 7.5% of their AUM; personal loan segment to be the ‘big challenge’ this year
Stressed assets of non-banking financial companies (NBFCs) are likely to touch ₹1.5-lakh crore to ₹1.8-lakh crore by the end of the current fiscal, according to a report by Crisil.
However, the one-time Covid-19 restructuring window, and the micro, small and medium enterprises (MSMEs) restructuring scheme by the Reserve Bank of India (RBI) will limit the reported gross non-performing assets (GNPA), it said in a statement on Tuesday.
“Alongside wholesale loans (dominated by real estate and structured credit), vehicle finance, MSME finance and unsecured loans have been in the spotlight this year due to a rise in stressed assets,” it said. The impact is likely to be transitory for vehicle finance.
“The big challenge this year will be the unsecured personal loans segment, where underlying stress has increased significantly with early-bucket delinquencies more than doubling for many NBFCs. This segment had last seen such pressure in 2008-10, after the global financial crisis,” it further said.
Unsecured loans to MSMEs is another area where underlying borrower cash flows have been affected, Crisil also highlighted. “However, despite the potential asset-quality stress, reported metrics may stay benign on the back of high write-offs,” it said.
Stressed assets in real estate finance could touch 15 per cent to 20 per cent of AUM by March this year, the agency said. In the category of unsecured loans (including personal loans and consumer durables), stressed assets could amount to 9.5 per cent to 10 per cent of AUM, while in vehicle finance it could be at a similar 9 per cent to 10 per cent of AUM. Stressed assets in lending to the MSME segment could reach 7.5 per cent to 8 per cent of AUM by March this year, Crisil projected.
Krishnan Sitaraman, Senior Director, Crisil Ratings, said, “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.”
Gold loans and home loans should stay resilient, with the least impact among segments, he however, said.
Rahul Malik, Associate Director, Crisil Ratings, said how NBFCs approach restructuring will differ by asset class and segment. “While the traditional ones such as home loans have seen sub-1 per cent restructuring, for unsecured loans it is substantially higher at 6 per cent to 8 per cent on average, and for vehicle loans 3 per cent to 5 per cent,” he said.