Housing finance company gross NPAs could reach 3.6-3.8% in the fourth quarter of FY22

Gross non-performing assets (GNPA) of housing finance companies are expected to increase 3.6-3.8% in the fourth quarter of the current fiscal year, compared to 3.3% in December 2021, due to the standards of the Reserve Bank of India (RBI) on Asset Upgrade and Covid-19 Pandemic Lag Effect. “GPAs will be 3.6-3.8% as of March 31, 2022, which will be 30-50 basis points higher than GPAS as of December 31, 2021,” said Sachin Sachdeva, Vice President and Sector Head, financial sector ratings, Icra .

Analysts believe that GNPAs would rise further after September 2022, when the November 12 central bank circular will be adopted by all housing finance companies (HFCs). According to reports, most HFCs have already switched to the new calculation method.

“The impact for housing finance entities could be in the range of 25 to 150 basis points, and for affordable housing finance companies in the range of 75 to 200 basis points,” Sanjay said. Agarwal, senior director of CareEdge. The central bank last month postponed the implementation of the revised NPA upgrade standards until September 30, 2022.

However, HFC NGPAs are expected to improve over the next fiscal year as companies adopt the new guidelines and educate their customers about them. There is a considerable improvement in the compensation cycle for a segment of the self-employed, which also has a ripple effect on reimbursements. However, CareEdge expects delinquencies to be higher in companies with a higher proportion of loans against real estate and construction financing.

“We do not foresee any major impact for HFCs in the future. We believe it will take the industry and clients six to twelve months to adapt to the new standards and rebound from their previous NPA levels,” said Ravi Subramanian, MD and CEO, Shriram Housing Finance.

The collections of these entities in the retail portfolio have seen improvement and are close to pre-Covid levels, while the retail portfolio has grown significantly. However, negative drivers can be seen in Q1FY23 in the affordable segment.

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