This is what emerges from CRISIL’s annual seminar on the NBFC sector which addressed the problems and perspectives of this financial sector.
According to a report prepared by Motilal Oswal Financial Services based on discussions at the NBFC event, from a flat AUM (assets under management) in FY21, the NBFC sector is expected to experience a rebound in the growth of 5 to 6% year-on-year in fiscal year 22..
However, this would be driven by the top 5 NBFCs alone. Excluding these NBFCs, the industry is also expected to experience stagnation in assets under management in FY 22, according to the brokerage report.
Home loans and gold loans will remain the main growth drivers with single-digit and low-rate AUM growth, respectively. Vehicle financing should see only mid single-digit growth in FY22, while LAP portfolios are expected to be largely stable, according to the report.
Wholesale funding would see single-digit assets under management decline in FY22. Thus, the trend towards “retailing” AUMs is also expected to continue in FY22, he added.
On the asset quality front, mortgage loans are in the best position and should only experience an 80bp increase in stressed loans by March 2021 for. current levels. In contrast, auto finance and MSME finance would see a 400-500bp increase in stressed loans.
Although liability concerns have eased due to the RBI measures such as the TLTRO and PCG programs, bond issuance is at 50 percent of levels from two years ago.
Moreover, while securitization volumes have plunged in 1HFY21, they are expected to recover in the future. Nonetheless, co-lending and banking partnerships are the way forward for small NBFCs, according to the report.