NBFC bad debt up 1.5% in Q3 due to revised norms: Report

The gross non-performing assets (GNPA) of non-banking lenders, or bad loans, rose by 1.50 per cent to 6.80 per cent in the December quarter due to revision of Reserve Bank of India (RBI) norms. Credit rating agency Crisil said in a report on Friday that the GNPAs of non-banking financial companies (NBFCs) would have improved by 0.30 per cent in the October-December quarter if the RBI norms had not changed.

However, GNPAs of NBFCs are likely to decline in the coming times. CRISIL expects GNPAs to improve going forward, with financial companies tightening their collection processes and improving economic activity as well.

This impact on the GNPA of NBFCs in the third quarter of the current financial year is the result of two important changes in the RBI rules. The RBI circular made it necessary to calculate NPAs on a daily basis instead of at the end of the month. Apart from this, increasing the strictness in the upgradation of NPAs has also affected. The CRISIL report says the impact of the RBI circular varies from segment to segment and the gold loan segment remains strong. In the auto finance segment, the impact was so strong that the NPAs rose by five percentage points.

On February 15, RBI has issued another circular regarding the determination of NPA norms. In this, it has been decided to give interim time to NBFCs by deferring the implementation of NPA norms till 30 September 2022. The NPA situation is expected to improve upon its implementation. “We expect GNPAs of NBFCs to come down to 1.5-2 per cent by March 31, 2022,” said Krishnan Sitharaman, senior director and deputy chief rating officer, CRISIL.