IGI Logo

Crisil Ratings in its latest report has said that Non-banking financial companies (NBFCs) showed resilience in 2021 despite the coronavirus pandemic woes and are expected to witness continued momentum in growth in 2022. It noted that this year, the growth will be driven by the uptick in the economy, stronger balance sheet, higher provisions and improved capital positions of NBFCs.

On the other hand, the report said gross non-performing assets (NPAs) of NBFCs are likely to rise, following the Reserve Bank of India's (RBI) move to tighten the NPA norms in November 2021. The asset under management (AUM) of shadow banking players is expected to grow at 6-8 per cent in the current financial year and 8-10 per cent in the next financial year. With increased pace of vaccinations and the broadening revival of the economy, the NBFC sector is expected to remain buoyant. 

It further expects reported NPAs for NBFCs to rise between 25-300 basis points, depending on which segment they are operating in. While for home loan and gold loans, NPAs will be in the lower end of the range; and for MSMEs or unsecured loan NBFCs, it will be at the higher end of the range. However, this will not impact the fundamental asset quality material because it is more of an accounting metrics. The funding condition of NBFCs is stabilising because banks are lending to them. Mutual funds, that had become very cautious to lend to NBFCS, have now also started lending. NBFCs are also diversifying their funding base by looking at retail borrowing.