Business pressure for shadow bankers increased in the September quarter of 2019 (Q2). Data from the Finance Industry Development Council (FIDC) shows the amount of non-bank financial corporations (NBFCs) sanctioned loans fell 34 percent to Rs 1.95 trillion in the second quarter. In the June quarter of 2019, the number of sanctioned loans was 15.5 percent below the previous year’s figure. FIDC is a representation of the NBFCs.
The dire sanctions affected many product categories. The residential construction, fixed-term loans (medium and long-term) and commercial vehicles segments, which together accounted for over 48 percent of the total sanctions imposed by the NBFCs in FY19, reported a year-on-year decrease in sanctions of 23 percent, 85 percent and 36 percent in the second quarter, respectively. In particular, the proportion of fixed-term loans in the total sanctions of
NBFCs fell sharply in the second quarter from around 18 percent in FY19 to around 5 percent.
However, personal loans and gold loans saw sanctions rise 22 percent and 17 percent in the second quarter, compared to the same quarter last year.
The five areas with the highest proportions of total credit sanctions in FY19 reported a 30-54 percent decrease in the amount of the sanctions compared to last year. Maharashtra, Tamil Nadu, Karnataka, Delhi, and Gujarat had contributed approximately 55 percent of the total NBFC-approved loans of Rs 10.59 trillion in FY19.
The NBFC sector, including home finance companies, has suffered liquidity problems amid asset-liability mismatches for more than a year following the IL&FS crisis. The Treasury Secretary and the Reserve Bank of India have announced a series of measures to support the ailing sector. However, experts are waiting for the full implementation of these measures.
“It is high time regulators, bankers, financiers and investors took notice (NBFCs continued to decline sanctions) and made sure that all plans and funding packages announced for NBFCs are implemented to the last mile and expeditiously Without that the recovery of the sector is very difficult, “says Mahesh Thakkar, director general of FIDC.