Rating agency Crisil has said the nationwide lockdown due to COVID-19 will have near- term impact on collections and fresh-loan disbursements of non-banking financial companies (NBFCs) and the micro finance institutions (MFIs) , in particular.
The agency said MFIs will be the most impacted because collection of repayments involves visit to households, such borrowers typically have weak credit profiles and their income generation activities would be disrupted.
Home loans will be less affected as a majority of the borrowers are salaried and collections are through auto-debit instructions though affordable housing loans could witness challenges because of higher proportion of self-employed borrowers, whose income streams have been affected by the lockdown.
Vehicle finance would also face challenges in commercial vehicle loans because curtailed traffic will lead to weak earnings for fleet operators, Crisil said.
“We see the impact continuing after the lockdown ends, based on the profile of borrowers. Those self-employed, in informal jobs, and earning their salary in cash would bear the brunt beyond the near term because the economy will take time to recover,” said Krishnan Sitaraman, senior director, Crisil CRISIL Ratings.
The rating agency has already lowered its GDP growth estimate to 3.5% for fiscal 2021 from the 5.2% earlier.
It said any delay in return to normalcy will put pressure on collections and asset-quality metrics and any change in the behaviour of borrowers on payment discipline can affect delinquency levels.
“Disbursement of fresh loans will reduce substantially in the near team and remain muted in the medium term given the expected challenges on the economic front,” Crisil said.
