Credit growth of retail non-banking financial companies to halve in 2013-14: Icra

Rating agency Icra said on Wednesday that difficulties being experienced in commercial vehicle, construction equipment and gold loans will result in non-bank lenders' credit growth from the retail segment to halve in the ongoing fiscal year (FY14) to 8-10 per cent.

"Overall, ICRA expects NBFCs to report an 8-10 per cent growth in retail credit in FY2014, as against the 19 per cent achieved in FY2013," the rating agency said in a note.

According to the rating agency's estimate, credit by the sector has grown by only 5 per cent during the first nine months of the fiscal year ended December 31, 2013 as against 15 per cent achieved in the corresponding period last year.

The dip in credit growth can be attributed to "the significant slowdown being caused mainly by de-growth in the commercial vehicle (CV), construction equipment (CE), and gold loan segments", it said.

It can be noted that the dip in economic growth - experts are suspecting if we would even get to the 5 per cent mark for FY14 - coupled with government's inability to kick start projects, and judicial interventions like the ban on mining, have resulted in difficulties for the the commercial vehicle and construction equipment sectors.

Gold loan demand has been constrained due to regulatory policies of having lower loan to value ratios for a better part of the fiscal, which has now been raised.

The agency also expressed concern on the asset quality front for the NBFCs, saying the 90 days past due delinquencies on retail loans - the trigger for classifying an asset as a NPA at a bank - have moved up to 4.3 per cent in December 2013 from the 3.5 per cent in March 2013.

Following the Reserve Bank of India (RBI) coming out with regulations over restructured assets for the NBFCs, Icra said the overall restructured advances of retail-focused NBFCs are expected to be in the range of 1.25-1.50 per cent, which is the same level as private sector lenders.