Housing finance companies’ gross NPAs may rise to 3.6-3.8% in Q4 FY22

Gross non-performing assets (GNPAs) of housing finance companies are likely to rise to 3.6-3.8% in the fourth quarter of the current financial year, from 3.3% in December 2021, due to the Reserve Bank of India’s (RBI’s) norms on upgradation of assets and lag effect of the Covid-19 pandemic. “GNPAs to be 3.6-3.8% as of March 31, 2022, which will be 30 to 50 basis points higher than GNPAs as of December 31, 2021,” said Sachin Sachdeva, vice-president and sector head, financial sector ratings, Icra.

Analysts believe GNPAs would rise further post-September 2022, when the November 12 circular of the central bank will be adopted by all housing finance companies (HFCs). As per reports, most HFCs have already switched to the new way of calculating.

“The impact on 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,” said Sanjay Agarwal, senior director, CareEdge. The central bank last month deferred the implementation of the revised norms pertaining to the upgradation of NPAs to September 30, 2022.

GNPAs of HFCs, however, are expected to improve in the next fiscal year as companies adopt the new guidelines and inform customers about the same. There is a considerable improvement in the earning cycle for a self-employed segment, which has a rub-off effect on the repayments as well. However, CareEdge expects delinquencies to be higher in companies with a higher proportion of loans against property and construction finance.

“We don’t foresee any major impact for HFCs going ahead. We believe it will take six-12 months for the industry and customers to adjust to the new norms and bounce back their earlier NPA levels,” said Ravi Subramanian, MD & CEO, Shriram Housing Finance.

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

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