Share of HFCs, para banks in home loan bad debt pile triples in 2 years
The overall NBFC credit exposure to the commercial sector may also have come down.
About 7 per cent of the NBFCs with home loan exposure had high delinquency levels in the quarter to December 2016. This share climbed to 19 per cent in the next eight quarters, suggesting an increase in high risk exposure by these non-banks.
The central bank has defined lenders with twice the industry average delinquency rate as ‘high delinquency level firms.’ “With reference to delinquencies in two major asset categories, viz. home loans and loans against properties, asset share of NBFCs/ HFCs with higher levels of delinquencies form 19.3 per cent and 11.5 per cent of their combined assets, respectively, as on December 2018,” the central bank said in the report.
In other asset classes such as personal loans, the share of high delinquency non-banks was about 13.1 per cent, while in the auto loan segment, 30 per cent of the operating NBFCs had high levels of bad loans. “A look at the evolution in delinquency levels in each of the segments shows that NBFCs as a group have been leading delinquency levels in almost all the subsegments of consumer credit,” the report said.
After IL&FS defaults last September, the sector faced difficulties in raising funds and balancing their asset liability management. Home financiers, whose primary asset classes have much higher maturity cycles, were particularly hit.
“The quantum of solvency contagion losses to the banking system caused by idiosyncratic failure of a stand-alone private NBFC/HFC shows that such losses are dominated by HFCs, as the top five solvency-loss inducing institutions are all HFCs,” the report said.
Overall asset quality of the NBFC sector deteriorated with gross NPAs increasing to 6.6 per cent in FY19 as against 5.8 per cent in FY17. Separately, the consolidated balance sheet of NBFCs grew by 20.6 per cent in FY19 to Rs 28.8 lakh crore as against 17.6 per cent growth to Rs 24 lakh crore in FY18.
“Given the substantial growth rate in exposure to these sectors, a possible concern is dilution in credit standards,” the report said.
The overall NBFC credit exposure to the commercial sector may also have come down, the central bank indicated.
“As per estimates of the flow of resources to the commercial sector in 2018-19, the non-bank share in credit was at 26.6 per cent of the aggregate domestic sources. The share is showing a declining trend relative to 2017-18 (39.1 per cent),” as per the report.