Money & Banking

Loan moratorium may have substantial impact on private NBFCs, HFCs: RBI

Our Bureau. Mumbai | Updated on July 24, 2020 Published on July 24, 2020

The loan moratorium could have a significant impact on private non-banking finance companies and housing finance companies, the Reserve Bank of India has noted in its Financial Stability Report.

“The impact of the moratorium on private NBFCs and HFCs can be substantial, with proportion of assets under the moratorium for NBFCs averaged between 39 per cent and 65 per cent based on underlying assets, with approximately 50 per cent of the aggregate assets under moratorium as on April-end,” the RBI report released on Friday noted.

Based on the disclosures made by NBFCs and HFCs, the assets under moratorium are dominated by wholesale customers and real-estate developers, although retail portfolios in the micro-loans and auto loan segments have also been affected, the report further said, adding that access of NBFCs and HFCs to capital markets, both debt and equity, is of significant importance to the sector.

The RBI also noted that the declining share of market funding for NBFCs is a concern as it has the potential to accentuate liquidity risk for them as well as for the financial system.

“Smaller, mid-sized and AA or lower rated, unrated NBFCs have been shunned by both banks and markets, accentuating the liquidity tensions faced by NBFCs, which was also reflected in the lacklustre response to the Targeted Long-Term Repo Operations 2.0 (TLTRO 2.0),” it said.

System-level stress tests for the NBFC sector’s aggregate credit risk for the quarter ending December 2019 were carried out under three scenarios: increase in GNPA by 1 SD, 2 SD and 3 SD, the report further said.

It is assessed that the sector’s CRAR would decline from 19.4 per cent to 17.2 per cent in the first scenario, to 16.4 per cent in the second scenario, and to 15.2 per cent in the third scenario.

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Published on July 24, 2020
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