MUMBAI: Fitch Ratings on Monday said Indian non-bank financial companies (NBFCs) should improve credit growth and mitigate asset-quality risks in FY23. This should support performance amid a macroeconomic recovery, although some segments may still be hit by higher-than-expected inflation, it said.
Fitch revised outlook On stabilizing India’s BBB- Sovereign Rating from negative to negative in June 2022. This, it said, marks a rapid economic recovery and mitigation of financial sector vulnerabilities, mitigating downside risks to the country’s medium-term growth despite near-term inflation. adverse winds
Gross domestic product (GDP) rebounded from 8.7% in FY12 after contracting to 6.6% in FY12, and Fitch forecast solid medium-term growth potential of around 7% between FY24 and FY27 Put it.
“We do not expect a significant increase in non-performing loans, as the economic recovery should reduce the repayment capacity of borrowers. Runaway inflation will risk a significantly sharp hike in policy rates, with a potential impact on more economically sensitive sectors such as small and medium enterprises (SMEs) and property developers,” it said.
It added that the funding and liquidity profiles of large NBFCs are likely to remain stable, even if the cost of funding is in line with rising policy rates domestically and globally. The impact on the net interest margin of NBFCs will vary depending on their loan segment and pricing power.
“Nevertheless, we expect sector profitability to remain stable overall, in light of strong anticipated credit volumes and improving credit cost.”