Non-Bank Lenders’ Asset Growth To Fall By Half, Says Crisil

The recent liquidity crisis among non-bank lenders may be easing slowly, but it's far from business-as-usual for them, according to Crisil.

Growth in assets under management for non-bank and housing finance companies is expected to fall by half to 9-10 percent in the second half of the ongoing financial year, the rating agency said in a press release on Wednesday. This, it said, may lower growth of assets managed by them for the full fiscal to 15 percent.

While the retail asset quality is expected to remain steady, loans against property, loans to small and medium enterprises and real estate developers will be monitored closely, Crisil said. The non-performing assets in loans against property, it cautioned, may breach the 3-percent level in the medium term.

In the non-retail segment, disbursements dropped 20-40 percent compared with the first half of the financial year, Crisil said. For major non-banks, the rollover rate of commercial paper rose from about 40 percent in October to 75 percent in November, indicating a gradual improvement in liquidity, it said. Also, funding options such as securitisation and retail bonds have enabled non-bank lenders to reduce reliance on short-term borrowings, a trend Crisil expects to continue.

“Non-banks are expected to improve their liabilities management by increasing on-balance sheet liquidity buffers,” said Ajit Velonie, director at Crisil Ratings. Additional measures like liquidity coverage ratio and net stable funding ratio mandated for banks, and closer monitoring of asset-liability maturity positions can make non-banks more resilient to short-term liquidity shocks, strengthening the sector further, Velonie said.