Icra Believes That Rbi’s Recent Norms Could Increase Npas For Nbfcs.

ICRA believes that RBI’s recent norms could increase NPAs for NBFCs.

New Delhi, Nov 28, : A recent notification by the Reserve Bank of India on income recognition, asset classification and provisioning norms for banks and non-banking financial institution and all-India financial institution may cause a sharp rise in non-performing assets (NPAs), for non-banking finance company, ICRA stated.
The central bank had stated that the classification of non-performing and special mention accounts should be done on an individual basis.

 Icra Believes That Rbi’s Recent Norms Could Increase Npas For Nbfcs.-TeluguStop.com

After clearing all outstanding overdues, the NPA category should be upgraded to standard after it is completed.

These new norms will have an impact on the earnings performance of such entities.

This would be visible over a few quarters if forward flows into NPA category aren’t contained, according to the ratings agency.

A.M.Karthik, ICRA’s Vice President for Financial Sector Ratings, stated that a stricter NPA upgrade requirement will likely push-up the NBFC (housing financing companies) NPAs of February 2022 by approximately 160-180 basis points and 60-60 basis points respectively over March 2021 levels.

The NPAs will be upgraded to the standard category only after all arrears have been cleared.

The agency stated that while banks won’t be affected by this because they have been following the norm, NBFCs have normally been upgrading NPA accounts even with partial payments for outstanding overdues as long as the total overdues at the reporting date were less than 90 days.

It was held that the standard category for NBFCs NPAs would be affected as their target borrowers have limited ability to pay all dues.

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