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ICRA Ratings in its latest report has said that restrictions in movements imposed by various states are likely to impact collections of non-banking financial companies (NBFCs) and housing finance companies (HFCs), which may see NPAs rising to 4.5 - 5 percent by March 2022 vis a vis about 4 percent in December 2020. It said this in-turn would keep the earnings subdued in FY22; about 30 percent lower than the pre-Covid levels. 

According to the report, non-banks (NBFC and HFCs) will feel the stress of the second wave of COVID-19 and movement restrictions imposed by various states in April-May 2021, given the fact that 25-30 per cent of their loan collections happen through field collection teams and largely via cash. Loan collections by non-banks, which were impacted by the nation-wide lockdown and the loan moratorium till August 2020, saw a steady revival during the third and fourth quarters of FY2021. It expects this budding recovery to be stemmed by the second wave of the pandemic, which has led to localised lockdowns in various states starting mid-April 2021. 

The report further said with the likelihood of lockdowns extending into large part of June 2021 for most states and some normalization expected from July 2021, non-banks are set to witness roll-forwards into harder overdue buckets and delay in recoveries, which could push-up the overdues in the near-term. It also said write-offs, like the last fiscal, are also expected to remain elevated vis a vis the prior year trends. It added that non-banks with higher share of field-based collections are more adversely impacted; typically, entities focusing on borrowers with limited banking habits, rural borrowers and smaller loan tickets (non-digital loans) have a higher share of their collections from field operations.