Loans approved by the NBFC sector decrease 34% in the second quarter, personal loans rise

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.

Dear Reader,

Business Standard has always endeavored to provide updated information and commentary on developments that are of interest to you and that have far-reaching political and economic implications for the country and the world. Your encouragement and constant feedback to improve our offering has only strengthened our determination and commitment to these ideals. Even in these troubled times resulting from Covid-19, we continue to strive to keep you updated with credible news, authoritative views, and concise comments on current affairs.
However, we have a request.

In the fight against the economic effects of the pandemic, we need your support even more so that we can continue to offer you high-quality content. Our subscription model has received an encouraging response from many of you who have subscribed to our online content. More subscriptions to our online content can only help us achieve our goals of offering you even better and more relevant content. We believe in free, fair and credible journalism. Your support through more subscriptions can help us practice the journalism to which we are dedicated.

Support quality journalism and Subscribe to Business Standard.

Digital editor

About Gloria Skelton

Check Also

SiriusPoint Ltd. Contingent value rights to negotiate on the

HAMILTON, Bermuda, June 16, 2021 (GLOBE NEWSWIRE) – SiriusPoint Ltd. (“SiriusPoint” or the “Company”) (NYSE: …