NBFCs, HFCs may see growth halve in 2nd half of FY19

MUMBAI: Non-banking finance companies and housing finance companies are likely to see growth halve in the second half of the financial year due to impact on disbursements, intense competition and liquidity squeeze.A report by rating company Icra said that housing finance companies are likely to grow at 12-14% in the second half of the financial year against 22% as the pace of bank growth is likely to increase. NBFCs are likely to grow at 16-18% against agrowth of 25% in the first half. Retail-NBFC credit growth for financial year 2018-19 is likely to moderate to 16-18% as against 24-25% growth in the first half. Growth rate in the second half is expected to roughly halve to about 12% basically due to slowdown in credit to loans against property (LAP), SMEs and commercial vehicles. LAP and SME segment borrowers are likely to face higher refinance cost and delays in incremental credit as the liquidity position of NBFCs is tighter than in the past, the report stated. Icra expects contraction in operating profits and increase in credit cost to impact net profitability by about 1.6-1.8% for the current financial year. It expects entities to hold incremental buffer of about 2-3% of the total assets and therefore, the impact could be about 5-15 basis points on the net interest margins depending on the NBFCs’ current business yield.67375357

Stress is expected in vehicle finance and SME credit segments because of the increase in fuel costs and slowdown in meeting incremental financing in case of SMEs. HFCs will see stress in the self-employed segment.After the RBI dispensation on securitisation by banks, an additional Rs 75,000 crore was made available for NBFCs and HFCs. For portfolio growth of 15%, HFCs need incremental funding of Rs 1.7-1.9 lakh crore in the second half of the fiscal year. The NBFC resource profile is concentrated between banks and mutual funds, which together account for 75-80% of the total NBFC borrowings. Bank credit to NBFCs has jumped sharply in September 2018 and increased further in October 2018 roughly by about Rs 70,000 crore, which was the estimated funding requirement in September 2018 to offset pressures on account of maturities of commercial papers in the third quarter. At the same time, mutual funds have become wary of their exposures. RBI is working on an asset liability mismatch guideline. The report noted that mismatch between lending and borrowing is high in the 5-7 year and 3-5-year segments.The overall credit growth NBFCs will be around 16-18% while HFCs will grow at 14-16% in the financial year.

Read more: economictimes.indiatimes.com

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