More Stories

Informist, Friday, Sep 20, 2024

 

--RBI paper: Asset quality of the NBFC sector has improved

--RBI paper: Gross NPA ratio of NBFCs has declined across sectors

--RBI paper: Slippages in NBFC credit card receivables remain high

--RBI paper: NBFCs sector resilient to potential shocks on RBI steps

--RBI paper: NBFCs with high unsecured book may need more capital

--RBI paper: Upper layer, middle layer NBFCs well-capitalised

--RBI paper: NBFC retail loan segment has lowest gross NPA ratio

 

MUMBAI – Although the slippage ratios of vehicle loans and gold loans of non-banking financial companies have moderated over the last two years to December 2023, they remain high compared to other retail loan categories, the staff of Reserve Bank of India said in a paper today. However, the slippage ratios of credit card receivables segment continue to remain high.

 

Slippage ratio refers to the ratio of accretion of non-performing assets to total outstanding advances.

 

However, the RBI paper said that the overall asset quality of the non-bank lenders improved over the period. "While the gross NPA ratio of upper layer NBFCs is lower than that of middle layer, the latter maintained adequate provisions to account for their riskier loan portfolio, thereby bringing their net NPA ratio below that of NBFCs-UL (upper layer)," the paper said. The views expressed in the paper do not necessarily reflect those of the central bank.

 

The gross non-performing asset ratio of the middle layer non-bank lenders fell to 3.7% as on Dec 31 from 6.3% as on Dec 31, 2021 and the net NPA ratio fell to 1.2% as on Dec 31 from 2.9% in Dec 31, 2021, data cited by the paper showed.

 

The fall in the gross NPA ratio was across loan segments, with the retail loan segment having the lowest gross NPA ratio despite high unsecured retail lending, the paper said.

 

In 2023, in order to reduce the dependency of non-bank lenders on banks for credit and broad-base their funding sources, the RBI increased risk weights on bank lending to non-bank lenders. Since then, there has been a fall in borrowing by non-banks from banks particularly from the upper-layer non-bank lenders, the paper said.

 

The paper said that with the increase in risk weights on some categories of retail loans, non-bank lenders that have a higher portfolio of unsecured loans may require additional capital to adhere to regulatory capital requirements. However, the paper said that the NBFC sector as a whole remains well capitalised.

 

The paper also said that the prompt corrective action guidelines that will become applicable for government-owned non-bank lenders from Oct 1, will help to further strengthen the sector. This framework will help monitor the capital and asset quality of non-bank lenders, the paper said.

 

The paper said that non-bank lenders need to remain mindful of the rapidly evolving financial landscape and the emerging risks and challenges, especially in areas of cyber-security and climate risk. "It is incumbent upon NBFCs to proactively identify and manage risks and bolster their assurance functions to ensure that the NBFC sector maintains a sustainable growth trajectory," the paper said.  End

 

Reported by Kshipra Petkar

Edited by Ashish Shirke

 

For users of real-time market data terminals, Informist news is available exclusively on the NSE Cogencis WorkStation.

 

Cogencis news is now Informist news. This follows the acquisition of Cogencis Information Services Ltd by NSE Data & Analytics Ltd, a 100% subsidiary of the National Stock Exchange of India Ltd. As a part of the transaction, the news department of Cogencis has been sold to Informist Media Pvt Ltd.

 

Informist Media Tel +91 (22) 6985-4000

Send comments to feedback@informistmedia.com

 

© Informist Media Pvt. Ltd. 2024. All rights reserved.