Business Bureau :
THE profitability of non-banking finance companies (NBFCs) may be ‘dampened’ going ahead due to the loan impairment and lower credit demand, the Reserve Bank of India (RBI) said in its Report on Trend and Progress of Banking in India 2019-20. “Going forward, profitability of NBFCs may be dampened due to loan impairment, lower credit demand and a tendency to preserve cash,” the RBI report released on Tuesday said. Due to loan moratorium and asset classification standstill, asset quality shored up.
However, many NBFCs have made additional provisioning as per expected credit loss (ECL) norm; and bolstered their capital position by ploughing back dividends, it said. In order to mitigate the impact of COVID-19, the RBI allowed lending institutions to grant a moratorium on payment of instalments of term loans due between March 1, 2020, and May 31, 2020, which was later extended till August 31, 2020.
The percentage of customers availing the moratorium has been relatively lower for NBFCs, while loans outstanding under moratorium were higher than those extended by scheduled commercial banks indicative of incipient stress, the report said. As on August 31, 2020, around 26.6 per cent of the total customers of NBFCs availed moratorium and close to 44.9 per cent of their total loan outstanding was under moratorium, it said. The consolidated balance sheet of NBFCs decelerated in 2019-20 due to stagnant growth in loans and advances beset with a challenging macroeconomic environment, the report added.