Money & Banking

Infra credit growth tepid in H1 FY21: ICRA

Mumbai | Updated on January 04, 2021

The trajectory of total infrastructure credit in India (banks and infrastructure finance non-bank companies) slowed to 1 per cent sequential growth in H1 (April-September) FY21 in the backdrop of Covid-induced disruption, according to credit rating agency ICRA.

While the infrastructure credit grew 7 per cent in FY20 (19 per cent in FY19) to ₹22.5-lakh crore as on March 31, 2020, it increased marginally to ₹22.6-lakh crore as on September 30, 2020, as per the agency’s study.

Manushree Saggar, Vice-President and Head – Financial Sector Ratings, ICRA, said: “The tepidness in infrastructure credit in H1 FY21 was primarily due to the sequential de-growth (10 per cent) in banking sector credit to the infrastructure segment, though NBFC-IFCs continued to grow at a modest sequential pace of 12 per cent in this period.

“However, the growth was majorly led by disbursements related to liquidity package announced by the government for cash-strapped discoms.”

As per the study, the share of NBFC-IFCs (non-banking finance company - infrastructure finance company) in infrastructure credit has increased to 53 per cent as of September 30, 2020, from about 38 per cent five years ago.

The decline in share of banks during past few years was largely attributable to the conversion of their exposures to state distribution companies into bonds and subdued lending amid asset quality issues and capital constraints, it added.

At the same time, portfolio for NBFC-IFCs continued to grow though largely at the back of growth in the public sector NBFC-IFCs.

Asset quality

As for asset quality, ICRA assessed that the NBFC-IFCs witnessed a deterioration during FY16-FY18, on the back of severe stress in the thermal power sector.

However, the trend over past three years suggested receding asset quality pressures, particularly up to onset of Covid-induced disruption.

The agency said the gross stage 3 (credit impaired financial assets) percentage had eased to 5.7 per cent as on March 31, 2020, from 7.3 per cent as on March 31, 2018, supported by controlled fresh slippages and some resolution in legacy stressed assets.

The gross stage 3 percentage for NBFC-IFCs eased further to four-year low of 5 per cent as on September 30, 2020, partly aided by limited forward bucket movement amid the prolonged moratorium period.

Further, while more clarity on the impact of Covid-induced disruption on asset quality trajectory will emerge over the coming quarters, most infrastructure sub-sectors remained relatively resilient from debt servicing perspective in lockdown conditions supported by factors such as must-run status of renewable energy projects, healthy recovery in toll collections, liquidity support to discoms etc.

Incremental stress limited

ICRA noted that most freight indicators have reverted to pre-Covid levels as economy revived, road traffic and toll collections have registered marked growth for three consecutive months on year-on-year (y-o-y) basis, electricity and fuel consumption is reverting to y-o-y growth trend, and construction activity has picked up in recent months.

Hence, the incremental stress in infrastructure sector due to Covid-induced disruption is expected to be limited, and the proportion of portfolio of IFCs likely to be restructured is expected to be in low single digits.

Nonetheless, any stress build-up in the near to medium term from spillovers due to the region-specific headwinds faced by the renewable energy sector remains a monitorable, the agency said.

Published on January 04, 2021

Follow us on Telegram, Facebook, Twitter, Instagram, YouTube and Linkedin. You can also download our Android App or IOS App.

This article is closed for comments.
Please Email the Editor

You May Also Like