NBFC Sanctions Fell 31 percent in Q4: FIDC-CRIF Insights

According to FIDC-CRIF data, sanctions by NBFCs in the fourth quarter of 2018-19 dropped by 30.79 per cent to ₹1.96-lakh crore, against ₹2.83-lakh crore in the same period a year ago.

“It is high time regulators, bankers, funders, and investors take note of this and work out quick remedial measures for well-run asset and loan financing NBFCs in sectors such as automobiles, MSME, and retail,” said Mahesh Thakkar, Director General, Finance Industry Development Corporation (FIDC). Gold loan sanctions grew by 110 per cent to ₹11,641.02 crore in the fourth quarter of last fiscal, while personal loans increased by 19 per cent to ₹14,105.34 crore in the same period compared to a year ago.

Two-wheeler loans
The sanction of two-wheeler loans, which many NBFCs extend, also declined by 15 per cent to ₹5,774.53 crore in the January to March 31 quarter, against a year ago, while loan sanctions for used cars fell by 7 per cent in the period under review to ₹1,225.81 crore. “Except gold loans, most categories dipped sharply. These are sectors having huge linkages and employment generation opportunities, such as housing, auto and commercial vehicles…the loss of jobs, too,” said Thakkar. Even for the full financial year 2018-19, industry-wise sanction of loans fell by 6.1 per cent to ₹9.06-lakh crore, compared to ₹9.65-lakh crore in 2017-18.

NBFC crisis
The data reveal that the drop in sanctions started from the third quarter of 2018-19 when some NBFCs reported defaults in repayment of debt. In the quarter ended December 31, 2018, loan sanctions by NBFCs amounted to ₹2.06-lakh crore, a decline of 16.6 per cent from ₹2.47-lakh crore in the same period in the previous fiscal.

Original Source: The Economic Times , The Hindu Business Line and FORBES