The gross bad loans of HFCs have grown by 0.70 per cent since last November, bringing non-banking financial companies (NBFCs) and housing finance companies (SFCs) on par with banks in terms of asset quality.
This is stated in a report by Crisil Ratings.
However, the bad loans are expected to stabilize by the end of this quarter.
The Reserve Bank of India on November 12, 2021 imposed stringent norms on asset quality reporting for all lending financial institutions. In this, NBFCs, housing finance companies were equated with commercial banks.
Although the new rules were to be applicable for all from December 31, 2021, the RBI this week extended the deadline for NBFCs and housing finance companies to September 30, 2022.
According to Crisil’s report released on Thursday, the Gross Non-Performing Assets (NPA) of affordable housing lending companies increased by 1.40 percent. On the other hand, the gross NPAs of other housing finance companies increased to 3.3 percent as on December 31, 2021 from three percent in September, 2021. The main reason for this is the circular issued on November 12, 2021 regarding identification and assessment of NPAs.
It said that had it not been so, the NPAs in December would have been 2.6 per cent. This means that the total asset quality has been affected by 0.70 percent due to the new rules.
Crisil studied 35 housing finance companies in its report. They hold 95 per cent of the industry’s assets under management.
On February 15, 2022, the Reserve Bank extended the deadline for implementation of the revised NPA rules from December 31, 2021 to September 30, 2022. However, it is unlikely to have much impact as most of the HFCs have already adopted the new method of assessment and are in a position to improve their gross NPA ratio and bring it down to 3 per cent by the end of the current financial year. Huh.