NBFCs, HFCs to Face Funding Headwinds: Fitch India Ratings

Non-Banking Finance Companies (NBFC) and Housing Finance Companies (HFCs) will face pressures on both growth and fundings, India Ratings, a Fitch group company, said.

India Ratings and Research (Ind-Ra) has revised its sector outlook on NBFCs to negative from stable. The agency has maintained its negative outlook on large ticket HFCs.

Ind-Ra expects structured finance (SF) rated transactions to remain stable in the second half of FY20, on account of cherry-picked loans, significant amortisation, minimum utilisation of credit enhancement and the consistently robust performance of underlying retail and commercial loan assets when compared to overall industry trends, it said.

Ind-Ra has cut its growth forecast for NBFCs for FY20 to 10-12 per cent from 15 per cent in view of the funding challenges and slowdown in economic activity, which is evident from the fall in auto sales, slowdown in rural infra activity and small and medium enterprises (SME) challenges.

The agency expects the overall profitability to moderate across the industry, as the rise in funding cost and falling lending opportunities would lead to increased margin pressure.

The ability to partially pass on the increase in funding cost to retail borrowers also remains constrained due to subdued demand, it added.