The liquidity situation of housing finance companies (HFCs) and the NBFCs may lead to slow down in credit disbursement in the second half of FY19, thereby impacting the overall credit growth in the current fiscal.
According to Rating agency Icra, consequent to factors such as tight liquidity, intense competition and other risks, the domestic HFCs may witness slowdown in their housing credit growth during H2FY19, which may affect their overall growth during FY2019.
The total housing credit outstanding stood at Rs 17.8 trillion; thereby registering a 17 per cent growth for the period ended September 2018, compared to 15 per cent in the same period in 2017. However, tight liquidity, which impacted disbursements will slow down the growth to 12-14 per cent in H2FY19, leading to a moderation in the overall housing credit growth of 14-16 per cent for FY19.
Moreover, for meeting a growth target of 15 per cent, rating agency Icra estimates that HFCs would need Rs 1.7-1.9 trillion in H2 FY19. The timely availability of incremental funding at competitive rates would be crucial for meeting repayments as well as for normal business growth, they added.
As for NBFCs, the retail credit stood at Rs 8.3 trillion as on September 2018. It has registered a 25 per cent growth year-on-year in H1FY19. However, the prevailing liquidity scenario is likely to slow down its growth to 16-18 per cent during FY19.
Also, the incremental cost of funds for the sector has increased by about 100-125 bps since H1FY2019 and this would have an impact on their earnings profile, moderation in portfolio growth, said rating agency Icra.
“Among the key target segments of NBFCs, some would witness headwinds, namely vehicle finance because of competitive pressures from banks while small enterprises and business credit would get hit as re-finance risk has increased for this segment post the liquidity squeeze,” A M Karthik, vice-president and sector head, Financial Sector Ratings at Icra.
Icra also expressed concerns on the asset quality of HFCs as well as NBFCs.