Mumbai: Assets under the management of the non-banking financial company segment decreased in the first quarter of 2021-22 due to lower and slum expenditures portfolios, according to a report.
After watching the uptick in Q3 and Q4 FY2021, the distribution for NBFC and housing finance companies (HFCS) declined again in Q1 FY22, and fell around 55 percent in sequence, ICRA said in the report.
“Given the disbursement and portfolio subdued by the absence of a moratorium as in Q1 FY2021, (AUM) to shrink the NBFC segment in Q1 FY2022, while HFC AUM remains flat,” said the agency.
While the distribution of this sector was revived quite sharply in July 202 on the back of a hidden request, the same sustainability will depend on a wider macro-economic indicator, he added.
According to Deputy Vice President and Head of the Sector (financial sector rank), Sagar, the second wave has pushed back the resurrection for this sector.
ICRA expects the overall disbursement for FY2022 to be higher than 6-8 percent on the base-year basis, behind two consecutive years from years-to-year contractions, he said.
“From the AUM perspective, this sector is expected to grow at 8-10 percent at FY2022.
Growth will be driven by an increase in demand from all the main target segments of the FY2021 Vis-A-Vis, behind the base low,” Sagar said.
The quality of assets for non-bank entities weakened quite sharply at Q1 FY2022 due to local locking imposed by various countries because of the second wave of Covid-19 infection, which influenced the process of collecting this entity, said the body.
The quality number of the main asset is expected to be moderate, because the trend in the efficiency of collection (CE) continues to be encouraging, he added.
This body holds expectations of 50-100 basis points (BPS) rise (after reducing recovery and activated) during the fall at FY2022, assuming there is no covid-19-induced locking further.
“While the pressure of the quality of assets remains survived, the increase in the overall provisions, which is currently 1.7x the pre-covid level (DES-19), provides convenience.
This will provide adequate concessive entities to technically delete and clean their balance sheets,” said Sagar.
The writing of the NBFC sector remains high in Q1 FY2022, he said.
Given the uncertainty in the operating environment, writing tends to remain high at FY2022 – similar to the last fiscal (around 2.4 percent AUM for NBFC and 0.3 percent for HFCs), he said.
NBFC’s credit costs side by side in Q1 FY2022 because removal remains increased and the provisions rise due to an upheld increase, the body said.
While the NPA / Phase 3 HFC also increased during the period, the cost of credit moderated vis-a-vis Q4 FY2021 because the provisions do not rise sharply such as NBFC and deletion ignored.
As a result, net profit fell during the quarter to the lowest level in the past.
Sagar said that the assumption of no further locking, the performance of the NBFCS income is expected to improve in the next quarter, because credit costs will be moderate with a reduction that is due from the June 2021 level.