Re­search Notes - UCB/NBFC

Banking Frontiers - - Highlights -

As of March 2017, there were 11,517 non­bank­ing fi­nan­cial com­pa­nies (NBFCs) reg­is­tered with the RBI, of which 179 are de­posit ac­cept­ing (NBFCs-D). There were 220 Sys­tem­i­cally Im­por­tant Non-De­posit ac­cept­ing NBFCs (NBFCsND-SI). All NBFC-D and NBFCs-ND-SI are sub­jected to pru­den­tial reg­u­la­tions such as cap­i­tal ad­e­quacy re­quire­ments and pro­vi­sion­ing norms along with re­port­ing re­quire­ments. The ag­gre­gate bal­ance sheet size of the NBFC sec­tor ex­panded by 14.5% dur­ing 201617 as com­pared to 15.5% dur­ing 2015- 16. Loans and ad­vances in­creased by 16.4% and in­vest­ments in­creased by 11.9% in March 2017, ac­cord­ing to FSR 2017.

In terms of bor­row­ings, com­mer­cial pa­per out­stand­ing rose by 70.3% and deben­tures out­stand­ing in­creased by 28.3% as on March 31, 2017; while bank bor­row­ings de­clined by 3.7%. Net profit was down by 2.9% dur­ing 2016-17. Net profit as a per­cent­age of to­tal in­come also came down from 18.3% in 2015-16 to 14% in 2016-17. ROA and ROE also de­clined dur­ing the same pe­riod.

GNPAs of the NBFC sec­tor as a per­cent­age of to­tal ad­vances de­clined from 4.9% to 4.4% be­tween Septem­ber 2016 and March 2017. NNPAs as a per­cent­age of to­tal ad­vances also de­clined from 2.7% to 2.3%.

As per ex­tant guide­lines, NBFCs are re­quired to main­tain a min­i­mum cap­i­tal con­sist­ing of Tier-I35 and Tier-II cap­i­tal, of not less than 15% of their ag­gre­gate risk-weighted as­sets. The CRAR of NBFCs de­clined from 23.1% to 22% be­tween Septem­ber 2016 and March 2017.

Stress test on credit risk for NBFC sec­tor as a whole for the pe­riod ended March 2017 was car­ried out un­der three sce­nar­ios: (i) GNPA in­creas­ing by 0.5 SD, (ii) GNPA in­creas­ing by 1 SD and (iii) GNPA in­creas­ing by 3 SD. The re­sults in­di­cate that in the first sce­nario CRAR of sec­tor may de­cline to 21.6% from 22.0%, in the sec­ond sce­nario, it may de­cline to 21.5% and in the third sce­nario it may de­cline to 21% but re­mained sig­nif­i­cantly above the reg­u­la­tory min­i­mum re­quired level of 15% un­der all the sce­nar­ios.

Stress test on credit risk for in­di­vid­ual NBFCs was also con­ducted for the same pe­riod un­der the same 3 sce­nar­ios. The re­sults in­di­cate that un­der the first 2 sce­nar­ios, around 8% of com­pa­nies will not be able to com­ply with the min­i­mum reg­u­la­tory cap­i­tal re­quire­ment of 15%, while 11% of com­pa­nies will not be able to com­ply with the min­i­mum reg­u­la­tory CRAR norm un­der the third sce­nario.

Newspapers in English

Newspapers from India

© PressReader. All rights reserved.