Assets under management of NBFCs to contract in FY21: Crisil

Assets under management (AUM) of NBFCs are likely to contract by 1-3 per cent in the current fiscal, for the first time in two decades as fresh disbursals drop sharply, according to Crisil Ratings.

It said that excluding the top five NBFCs, de-growth is expected to be sharper at 7-9 per cent.

In a statement, Crisil however said: “Lower repayments during the loan moratorium period (March 1, 2020, to August 31), and capitalisation of interest accumulated, will however help limit the de-growth.”

The rating agency noted that the major factors impacting the disbursements include the challenging macroeconomic environment, sharper focus on liquidity as incremental funding is not easy to come by for many players in a confidence-sensitive scenario.

Further, stiff competition from banks as funding costs for many NBFCs remain relatively high and the tightening of underwriting standards by NBFCs amid weak economic activity and expectations of increasing delinquencies would also impact disbursal.

Krishnan Sitaraman, Senior Director, Crisil Ratings said: “While disbursements across segments are expected to fall 50-60 per cent, AUM trajectory will differ by segment. Crisil’s analysis of the largest segments of the NBFC AUM pie shows that most segments could witness contraction in the current fiscal.

He was of the view that the silver lining would be gold loans, which constitute 5 per cent of the AUM. Growth here is seen to be relatively higher as more individuals and micro enterprises go for it to meet immediate funding needs.