Business pressure for shadow bankers got worse in September 2019 quarter (Q2). Data by Finance Industry Development Council (FIDC) shows that the amount of loans sanctioned by non-banking finance companies (NBFCs) plunged by 34 per cent year-on-year to Rs 1.95 trillion in Q2. In the June 2019 quarter, too, the amount of loans sanctioned was down by 15.5 per cent year-on-year. FIDC is a representative body of NBFCs.
The dismal sanctions were across many product categories. Housing, term loans (medium and long) and commercial vehicle segments, which together formed over 48 per cent of NBFCs' total sanctions in FY19 reported 23 per cent, 85 per cent and 36 per cent year-on-year fall in sanctions in Q2, respectively. Notably, the share of term loans in total sanctions by
NBFCs fell sharply to around 5 per cent in Q2 from around 18 per cent in FY19.
Personal loans and gold loans, however, reported an increase of 22 per cent and 17 per cent in sanctions in Q2, compared to the year ago quarter.
The top five territories in terms share in overall loan sanctions in FY19, reported a 30-54 per cent year-on-year decline in sanction amount. Maharashtra, Tamil Nadu, Karnataka, Delhi and Gujarat had contributed about 55 per cent to the total loans sanctioned by NBFCs of Rs 10.59 trillion in FY19.
The NBFC sector, including housing finance companies, has been reeling under liquidity issues amid asset-liability mismatch for more than a year following the IL&FS crisis. There has been series of measures announced by the finance minister and the Reserve Bank of India to support the struggling sector. However, experts are awaiting full implementation of those measures.
"It's high time regulators, bankers, financiers and investors take note of this (continuous fall in sanctions by NBFCs) and see that whatever schemes and funding packages announced for NBFCs are executed to the last mile and expeditiously, without which the recovery in the sector is very difficult," says Mahesh Thakkar, Director General of FIDC.