After IL&FS crisis, NBFCs’ asset growth to halve to 10% in H2

Difficulties in getting funding will halve the non-bank lenders’ asset growth to around 10 per cent in the second half of the current financial year, a report said.

The asset quality of retail loans is resilient, but the NBFCs’ (non-banking finance companies) non-retail book has to be monitored for potential stress, domestic rating agency Crisil said in its report on Wednesday.

The report comes amid difficult times for the NBFCs, which started with the crisis at infrastructure lender IL&FS, which extended to worries for the entire sector. Many were found to have borrowed short for long-term assets, resulting in asset liability mismatches that rattled investors. The borrowings were from investors such as mutual funds, who have turned wary and have increased the rates at which they want to lend. Crisil said while the liquidity issues are easing slowly, disbursement by NBFCs have gone down by 20-40 per cent, with a more cautious approach taken by the non-retail segments.

The non-banking finance companies, including housing finance companies, had notched up a 20 per cent growth in their assets under management for the first half of the fiscal ending September, which will slow down to 9-10 per cent in the second half, according to the report.