NBFCs' retail credit growth may fall to 13 pc in FY'14: ICRA

Retail credit growth of non-banking finance companies (NBFCs) is likely to fall to around 13 per cent this fiscal from a high of 19 per cent in FY'13 due to weak operating environment and asset quality pressures, rating agency ICRA said today.
As of the September quarter, NBFCs' retail book stood at Rs 3.4 trillion, an ICRA report said.
"The prevailing sluggish level of economic and industrial activity will continue to dampen credit growth.
"However, a possible uptick to NBFC credit growth could come from the gold loan segment, which is expected to benefit from the increase in regulatory loan to value restriction from 60 per cent to 75 per cent of gold value and also on account of the level-playing field brought by RBI.

"This will help the sector notch a credit growth of 11-13 per cent," the ICRA report said.
Retail credit growth for NBFCs has slowed considerably in H1 of the current year, which grew only 3 per cent to Rs 3.38 trillion against against a 8 per cent growth in H1 of FY13).

It was weighed on by 4 per cent de-growth in the new commercial vehicle (CV) segment, a 1 per cent de-growth in the construction equipment (CE) segment and a 9 per cent contraction in the gold loan segment, ICRA said.
On the other hand, credit growth to the mortgage segment remained robust at 8 per cent in H1, while credit to the used CV segment also continued to witness higher growth of 11 per cent.

On the asset quality front, the report said that overall delinquency levels of retail focused NBFCs saw a sharp deterioration across most asset classes, except gold loans on account of a challenging operating environment.
Based on ICRA's estimate, excluding gold loans, NBFCs' overall 90 day plus delinquencies as of the Q2 stood at 3.5 per cent against 2.7 per cent in March 2013, while the 180 day plus delinquencies rose to 1.5 per cent against 1.1 per cent in March 2013.
Segments contributing to this sharp spike in bad loans include CV (5.6 per cent as of the September quarter against from 4 per cent in March 2013) and CE at 4.6 per cent up from 3.7 per cent in March 2013.

On the other hand, asset quality indicators in the gold loan segment improved considerably with a reduction in overall delinquencies to 3.7 per cent in September 2013 against 8 per cent in March 2013 as NBFCs, the report said.