Non-banking finance companies (NBFCs) are likely to witness a slow growth at 17 per cent in retail credit in the ongoing financial year due to a significant slowdown in the key segments they operate in, says a report by credit ratings agency Icra.
"Non-banking finance companies are likely to witness a slowdown in their FY13 growth due to lower growth in the key segments they operate in....In light of significant slowdown in commercial vehicle, construction equipment and gold loan segments this fiscal, we expect their retail credit book to grow by only 17 per cent this fiscal," the report said.
As per Icra, segments like construction equipment, commercial vehicle and gold constitute around 56 per cent of NBFC's total retail credit.
The report also pointed out that due to the slowdown, there is likely to be some pressure on asset quality and margins.
"...(Due to the slowdown) there may be some build-up of delinquencies and a downward bias in interest margins.
Gross NPA numbers are likely to deteriorate from the last fiscal levels of 1.56 per cent due to an adverse operating environment", according to the report.
Segments like commercial vehicle, construction equipment, SME lending and capital market funding will see an increase in delinquencies, the report added.
The ratings agency also pointed out that the cost of funds for retail-focused NBFCs is likely to remain high.
"Cost of funds for retail-focused NBFCs remains high at 10.5-13 per cent, and is likely to remain elevated," it said.
Earlier Icra had noted that new RBI guidelines for NBFCs are likely to impact their profitability by 15-20 basis points in the medium term.
RBI has come up with draft guidelines on NBFCs as per the recommendations of Usha Thorat committee report, which proposed to implement 90 days NPA recognition norm instead of present 180 days, and higher tier-I capital for many NBFCs among others.