Asset quality of affordable HFCs likely to deteriorate in FY21: ICRA


New Delhi, June 10 | The indicators of asset quality, new businesses and profitability of affordable housing finance companies (AHFC) are likely to decline in financial year 2020-21 due to the impact of the coronavirus pandemic, said an ICRA statement.

It noted that debt servicing ability of these entities have been impacted off late as target borrowers are mostly self-employed and belong to the middle-to-low-income group whose income have taken a hit during the lockdown.

“According to estimates, the asset quality indicators of these entities could deteriorate by 50-100 per cent in FY2021, though the reported numbers would start showing up only from results of Q3 FY2021,” it said.

Due to the pandemic, the RBI first allowed a moratorium on term loans from March 1, 2020 to May 31, 2020, which was further extended till August 31, 2020. Following this, most of the HFCs have also extended a moratorium to their borrowers for this period.

As per estimates, 40-45 per cent of the portfolio of AHFCs is currently under moratorium. At the same time, many of these HFCs have not requested a moratorium from their lenders.

“Thus, their ability to service the debt in a timely manner would depend upon the extent of on-balance sheet (on-b/s) liquidity available and their ability to draw down the sanctioned but unutilised bank lines,” it said.

Manushree Saggar, Vice President, Financial Sector Ratings, ICRA said: “Given the expected impact of the pandemic on both new business and the asset quality, the profitability indicators of these entities could decline in FY2021. In our estimates, gross NPA per cent for these AHFCs could increase from 4.1 per cent as on December 31, 2019 to 5.5-6.5 per cent by end of FY2021.”

Source: IANS

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