Second wave of Covid-19 to increase bad debts of NBFCs, HFCs: ICRA

Rating agency ICRA said on Tuesday that the second wave of Covid and the ensuing lockdowns would impact the non-banking financial companies (NBFC) and housing finance companies (HFC) leading to increase in their bad debts and dip in collection efficiencies.

According to the rating agency, 25-30 per cent of collections done by NBFCs and HFCs happen through field visits and largely via cash. The collection was ramping up after the first wave in the first and third quarter, but the second wave have stemmed that recovery.

ICRA said NBFCs’ reported non-performing assets are set to increase to about 4.5-5.0 per cent by March 2022 vis-a-vis about 4 per cent in December 2020. “This in-turn would keep the earnings subdued in the current fiscal; about 30% lower than the pre-covid levels,” the rating agency said.