Non-bank lenders challenge caution and increase the risk of unsecured loans: report
MUMBAI: The problematic segment of non-bank lenders is challenging caution and increasing the riskiest portfolio at a rate of 25 percent in the current prosecutor, according to a report on Thursday.
A growing propensity for personal and attractive risk-adjusted returns are the possible reasons that drive non-bank financial companies (NBFCs) to grow in such loans, said the national rating agency Crisil.
The march has been very difficult for the NBFC segment since the crisis of the under-focused lender IL&FS in September 2018, with the shortage of liquidity and the economic slowdown.
Crisil said the growth of unsecured books by 25 percent is four times higher than the minimums of the decade in general assets under management, which are scheduled to record a 6-8 percent growth in fiscal year 2020 .
However, it is lower than the compound annual growth rate of 30 percent in unsecured loans recorded for fiscal fiscal years through fiscal year 2019, he said.
Since the IL&FS crisis, the main factors that affected access to unrestricted funds include increased loan costs, recalibration and elimination of loan book risks, and economic slowdown, he said.
The segment of unsecured loans has become a favorite due to a structural change in the conduct of the business, in which there is a greater dependence on the data of the credit agency, the largest risk-adjusted returns where other segments They fight to grow and the ability to have higher profit margins.
Growth in this segment (not insured) has not been unharmed by the recent turmoil, but the impact has been relatively minor, said senior director Krishnan Sitaraman.
He added that the proportion of unsecured loans in general assets under management for non-bank lenders will grow by 1.50 percentage points in a single year to 9 percent now.
Recognizing that late payments are not yet alarming, the agency warned that frantic growth can also raise concerns about asset quality because reimbursements can become very volatile depending on macroeconomic and region-specific events.
Late payments on personal and consumer loans are expected to increase this fiscal year, but will remain below 3 percent, while overdue payments over 90 days in unsecured loans to small businesses will grow to 0 , 60 percent during the fiscal year. The 4.5 percent level in fiscal year 19, he said.
The stress of two- and three-wheel loans is also expected to increase by 0.50-0.60 percent similar, he said.
While the non-productive assets reported in these segments do not seem worrisome at this juncture, cancellations have been very high because recoveries after non-compliance tend to be very low, said associate director Rahul Malik.
The agency also said that both non-borrowers and banks seem to have achieved a certain degree of ease with respect to the negotiation of unsecured loans, but stressed that it is necessary to have strong capital reserves.