Recast loans at non-bank lenders may double by this fiscal-end: Report

Recast loans at non-bank lenders may double 

On Monday, said in a report that non-bank lender’s restructured assets are estimated to double up to 3.3% by March 2022 largely because of the impact of the second wave of the covid-19. As of March 2021, after the first wave of the pandemic the same ratio had been found at 1.6%. Recast loans at non-bank lenders may double by this fiscal-end: Report

ICRA, the rating agency, said the restructured book for NBFCs is hoped to be 4.1-4.3% as of March 2022  same is expected to be 2.0-2.2% for housing finance companies.

The second wave of the pandemic has affected the growing recovery in non-bank collections observed in Q3 FY2021 and Q4 FY2021, affecting the cash flow of the primary borrowers.

The nature of the primary security governed the higher prevalence of recast for NBFCs, as across the housing finance companies (HFCs) which have some pledges, said by agency’s Vice-President A M Karthik 

He further added, borrowers procured by smaller entities would have a comparably more risk profile, also featured by higher yields, which reveals them to increased vulnerabilities in a downcycle or a tensed scenario.

During the last fiscal, vehicles and personal loans faced asset-quality related pressures. Although, entities with a sizable share of new and heavy and medium commercial vehicles observed higher restructuring.

In the meantime, the liquidity cover at NBFCs rated by it has improved from a year ago, putting them in a better position to service debt in the near period, which will mitigate the effect of the pandemic.

From last year, this trend changed after a moratorium on repayments and stringent restrictions affected collections and the asset-quality and liquidity fear amplified.

The rating agency said, by the second wave in the current fiscal year, the collections have once again been affected and in May the decline has been more conspicuous because restraint measures in most parts of the country kicked in only in the latter part of April.

It said, through special government schemes, the factors supporting the liquidity measures at NBFCs include fundraising, enhanced collections in the second half of fiscal 2021, and limited disbursements.


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