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The severity of lockdowns witnessed this year was relatively mild as compared to last year, most businesses remained partly operational, and only limited restrictions on the movement of goods and services were observed. That said, when it comes to e-commerce channels and digital model for collections, the absence of physical connect has not impacted such businesses.
In fact, as per the recent report by Emkay Global Financial Services on BFSI-NBFCs sector, although collections for unsecured SME, business loans, and consumer durables products faced obstacles, the credit cards segment saw positive growth as borrowers in general preferred to hold liquidity.
“With the most difficult phase largely over and respite provided by gradual unlock of the economy, lenders are optimistic about seeing improving trends in collections,” said an Emkay Global analyst who did not wish to be named.
Loan trend amongst borrowers
When it comes to vehicle loans, a mixed trend has been observed. The vehicle finance segment revived due to normalisation, while commercial vehicle and passenger vehicle loans remained under stress.
The Reserve Bank of India (RBI) has extended limited support toward the restructuring of loans this year that also includes small players. Experts believe that this may lead to a sharp surge in the overall restructured portfolio for most non-banking financial companies (NBFCs) including vehicle financiers.
“We remain concerned about the steep rise in assets (similar to last year), considering the addition of newly restructured loans to the already present book from earlier moratorium period. However, with regularization of economic activities, we expect trends to normalize by the end of FY22,” said an analyst at Emkay Global.
Buyers are mostly in the retail segment with good financial abilities and are able to command the price. Further increasing fuel prices are yet another discouraging factor that has pushed the demand for CNG vehicles.
“Although business recovery was halted during the second Covid wave, there is a built-in optimism for recovery playing out with the gradual unlocking and improvement in macros. We continue to like NBFCs with decent adequacy and diversified asset and liability mix,” the analyst added.