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Despite a slowdown in growth, NBFCs are expected to report a double-digit return on equity in the short to medium term, said a report by rating agency ICRA.
However, gold-loan companies could continue to remain under pressure in the short term.
“The rise in delinquencies and credit costs for NBFCs has been on expected lines. Although a challenging operating environment could continue to weigh on the asset quality of NBFCs, diversity in the borrower base, security based lending and proactive monitoring could keep the eventual losses under check,” said the report.
Gold loan companies could see some improvement once the proportion of the vulnerable high loan-to-value loans reduces, the report added.
The cost of funding would continue to remain high for NBFCs. Furthermore, the future cost of funding of NBFCs could also be impacted by the July 2013 RBI guidelines on funds raised by NBFCs through private placements of debentures, which cap the maximum number of investors to 49 for private placement issuances, the report added.
