Non-banking finance corporations (NBFCs) are likely to witness a slower growth in 2012-13 due to the lower growth in the key segments. Meanwhile, the NBFCs are likely to witness a build up of delinquencies and a downward bias in interest margins.
According to a report published by credit rating agency ICRA Ltd, despite the slowdown in growth, NBFCs are likely to report a double-digit return on equity (ROE). During 2011-12, the managed retail credit of NBFCs reported a 32% growth.
However, due to the slowdown in Commercial Vehicle (CV), Construction Equipment (CE) and gold loan portfolio segments, the rating agency also expects retail credit of NBFCs to grow only 17% in 2012-2013. The Commercial Vehicle (CV), Construction Equipment (CE) and gold loan portfolio segments put together account for around 56% of the total NBFC retail credit.
ICRA, in its report on performance review of retail NBFC’s and industry outlook, also said that the total NBFC retail managed credit amounts to Rs 2,96,000 crore as on March 31, 2012, was distributed across commercial vehicles, gold loans, mortgage, construction equipment, among others.
According to the agency, the net interest margins (NIMs) for NBFC as of March 2012 stood at 6.30%, which is lower by approximately 25 bp compared to the previous financial year on account of the increase in funding costs. As for the asset quality, gross NPA percentage of the NBFCs is likely to deteriorate from March 31, 2012, levels of 1.56% due to an adverse operating environment.
The cost of funds for retail-focused NBFCs remained high at 10.5%-13%. This is likely to remain elevated, says ICRA in view of the new SEBI guidelines capping the mutual fund investments in NBFC-issued debt securities.
