India Ratings cuts NBFC growth forecast to 10-12 per cent in FY20

In an indication of continued concerns for the NBFC sector, India Ratings on Monday revised its outlook for the non-banking finance companies to negative from stable and also maintained its negative outlook on large ticket housing finance companies (HFCs).

The agency also cut its growth forecast for NBFCs for 2019-20 to 10 per cent to 12 per cent from the earlier estimate of 15 per cent due to funding challenges and slowdown in economic activity, which is evident from the fall in auto sales, slowdown in rural infra activity and small and medium enterprises (SME) challenges.

“India Ratings and Research expects the overall profitability to moderate across the industry, as the rise in funding cost and falling lending opportunities would lead to increased margin pressure. The ability to partially pass on the increase in funding cost to retail borrowers also remains constrained due to subdued demand,” it said.

It also said that measure announced by the government to improve liquidity for the sector are likely to play out over the medium-to-long term.

The NBFC and HFC sector has been in the midst of a financial crisis for a year now and the Reserve Bank of India and the Finance Ministry have announced a slew of measures to improve funding to them.

India Ratings said that NBFCs focussed on retail asset financing with long track records have been able to mobilise funding owing to the granular nature of their loan books and the control they have exhibited in maintaining asset quality.

It however, cautioned that wholesale and semi-wholesale NBFCs in real estate, corporate lending and large ticket housing segment have seen challenges in mobilising liabilities, largely because of the asset-side perception risk arising from the slowdown in real estate and moderation in refinancing opportunities.

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