Now asset quality issues overshadow liquidity problem for NBFCs: Report

New Delhi, May 7 (IANS) As several private banks along with few public sector banks extend the term loan moratorium to non-banking finance companies (NBFC), an Emkay report has said that asset-side issues were more pertinent for NBFCs, rather than the persistent liquidity concerns.

In the report, Emkay Global Financial Services said in its discussions with smaller unlisted NBFCs and co-operatives across states indicate that they are availing bank moratorium, assignment, securitization and obtaining fresh borrowings to ride through the current liquidity challenges.

It further said that contrary to popular belief, most private banks and some public sector banks are extending RBI term loan moratorium to NBFCs.

“However, we remain concerned about the potential asset-side issues emanating from a consistent rise in demand for loan moratorium and difficulty in collection and recoveries amid lockdowns,” the report said.

It noted that 45-50 per cent of MSMEs and 75 per cent of vehicle loan takers have opted for the moratorium.

The report said that there is some pent-up demand for working capital loans which could trigger incremental credit growth after lockdowns are lifted.

“Demand for unsecured personal and business loans may remain high initially; however, lenders will prefer to remain cautious, which could impact the supply of credit,” it said.

With the recent dip in lending rates for most banks, a trend of balance transfer would prevail, especially in mortgages from smaller and regional NBFCs to banks, it said.

The brokerage firm's report further said that the impact of the ease in lockdown would be limited as the majority of consumption in the country is driven by metros and tier-I cities, most of which still remain as red zones.

The advantage would stay with micro-finance institutions and service-based industries in green zones, mostly rural areas where consumption is driven by local factors.



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