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NBFCs to see revival in growth this year, mild uptick in NPAs

Non-banking financial companies (NBFCs) showed resilience in 2021 despite the pandemic woes and are expected to witness continued momentum in growth this year.

NBFCs to see revival in growth this year, mild uptick in NPAs
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Reserve Bank of India. File photo

New Delhi

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, 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.

“Our baseline assumption is that the worst is behind them (NBFCs) and things will start improving here on. We expect NBFCs to show higher growth and they will benefit from the economy moving up,” Crisil Ratings Ltd Senior Director and Deputy Chief Ratings Officer Krishnan Sitaraman said. 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, Sitaraman said.

Recently, the Trends and Progress of Banking of India in 2020-21 report released by the RBI said, “With increased pace of vaccinations and the broadening revival of the economy, the NBFC sector is expected to remain buoyant.” ICRA Ltd Vice-President and Sector Head A M Karthik said the NBFC sector, including housing finance companies (HFCs) but excluding infra-focussed and government-owned entities, experienced a roller-coaster trend in the past 12-18 months.

The rebound in the H2 of FY2021 on the back of the pent-up demand and after relaxation of the COVID-19 lockdown supported growth and earnings performance, he said.

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