India Ratings Maintains Negative Outlook On NBFCs, Housing Finance Companies For Second Half Of FY21

India Ratings Maintains Negative Outlook On NBFCs, Housing Finance Companies For Second Half Of FY21

Domestic rating agency India Ratings and Research on Thursday said it has maintained a negative outlook on Non-Banking Financial Companies and Housing Finance Companies for the second half of 2020-21.

It said growth in assets under management would be flattish for NBFCs as against its earlier estimate of 8-10% year-on-year, and in lower single digits for HFCs in 2020-21. “We have maintained a negative outlook on the non-banking finance company (NBFC, retail and wholesale) and housing finance company sectors for 2HFY21, amid Covid-19 related business disruptions,” the rating agency said.

It said that considering the unabated spread of the virus at pan-India level, time required for NBFC operations to return to normalcy could be prolonged.

Although the liquidity and funding environment has improved for better-rated entities after July, there would be asset quality issues impacting overall profitability in 2020-21 and beyond, it said.

While it has a negative outlook on most of the asset classes, the rating agency has maintained a stable outlook on securitisation transactions for the second half of 2020-21. It was backed by home loans, vehicle loans, secured business loan (loans against property) pools, given the seasoning and credit enhancement build-up in these transactions.

However, it has revised its outlook to negative from stable for the securitisation transactions backed by microfinance loans, unsecured business loans and construction equipment loans because of the uncertainty around slippages after moratorium.

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