Rating agency Crisil on February 16 warned that stressed assets of non-banking financial companies (NBFCs) are expected to reach Rs 1.5-1.8 lakh crore, or 6-7.5 percent of the assets under management (AUM), by the end of FY21.
However, the one-time COVID-19 restructuring window, and the micro, small and medium enterprises (MSME) restructuring scheme offered by the Reserve Bank of India (RBI) will limit the reported gross non-performing assets (GNPAs), the agency said.
Unlike previous crises, the current challenges on account of the pandemic impacted almost all NBFC asset segments, Crisil said, adding operations were curbed the most in the April-June quarter, when disbursements and collections were severely affected by the hard-braking of economic activity.
Further, collection efficiency has improved since then, but it’s still some way off pre-pandemic levels in the MSME, unsecured and wholesale segments, given the volatility in underlying borrower cash flows, Crisil said.
NBFCs faced a major liquidity challenge following the 2018 IL&FS crisis and the DHFL collapse that followed. Banks, which are the major source of funds for NBFCs, tightened the lending in the subsequent period due to rising trust deficit.
Since then, the situation has improved. But, the onset of COVID-19 pandemic has come as a jolt to NBFCs. Although the RBI has announced several rounds of liquidity measures to ease the liquidity worries, this has mainly benefited only the big NBFCs.
Indian banks had an exposure of Rs 8.07 lakh crore to NBFCs at the end of March, 2020. This exposure has declined since then to Rs 7.89 lakh crore till December.