BY OUR CORRESPONDENT Mumbai
Nov. 11: Rating agencies have been issuing warnings about the deteriorating asset quality and tight liquidity affecting non-banking financial companies (NBFCs) over the last two months. According to ICRA and Crisil, the decline in disbur-sements is as much as 70 per cent in one case and an average of 50 per cent for others. The Indian retail credit market is estimated at Rs 7,00,000 crore (about 15 per cent of GDP) of which NBFCs contribute around 16 per cent as on September 30, 2008. Ms Vibha Batra, co-head, financial sector ratings of ICRA, said, "About 50 per cent of the borrowings of NBFCs were from mutual funds as on March 31, 2008. With the mutual funds facing redemption pressure, NBFCs are expecting to avail credit from the banks. This switch in the borrowings from the mutual funds to banks is difficult and could come at higher costs. In this scenario, the earnings of NBFCs are likely to come under pressure in the near future." Ms Batra further said, "Out of NBFCs' total lending, the share of the auto sector is 38 per cent and unsecured loans is about 16 per cent. In October, auto sales declined by 14.42 per cent and have affected the business volumes of the NBFCs. It could also be difficult to get refinance for unsecured loans." Crisil, which analysed the disbursement pattern of 33 rated NBFCs, said that their share in retail finance has reduced. Ms Roopa Kudwa, the managing director and chief executive officer of Crisil, said, "Most of the NBFCs have significantly slowed down disbursements becau-se of the lack of funds. The average monthly disbursements during September and October 2008 are estimated to be half of disbursements during August 2008. Their share in retail finance has reduced over the past few years as banks have achieved dominance." The balance sheets of NBFCs have a significant asset-liability mismatch, more than 50 per cent of NBFCs' borrowings have maturities of less than one year, while most of the assets have tenure of about three years. Banks today make more than two-thirds of retail finance disbursements, whi-ch is an increase of about 20 per cent in 2002, and this trend is expected to continue, she said. http://www.asianage.com/presentation/leftnavigation/news/business/nbfcs-likely-to-face-cash-crunch.aspx When prosperity comes, do not use all of it. --~--~---------~--~----~------------~-------~--~----~ You received this message because you are subscribed to the Google Groups "Kences1" group. To post to this group, send email to [email protected] To unsubscribe from this group, send email to [EMAIL PROTECTED] For more options, visit this group at http://groups.google.com/group/kences1?hl=en -~----------~----~----~----~------~----~------~--~---
