Riding The Time Machine
Outlook Money|April 2021
Covid-19 has battered non-banking financiers, assets are in the throes of defaults, yet they have proved their resilience time and again, and crossed the bar. NBFCs – which throw the lifeline to the base of the pyramid – are fixed firmly on the ground with their unmatched ability to evolve into indispensability for the Indian economy
Manik Kumar Malakar
Riding The Time Machine

Turn on the ignition, set the period back one year, and kick start the Time Machine. HG Wells had imagined an invasion of aliens, but he could never think that the onslaught of an earthly marauder would one day drive everything down into a darkness. A year later, when life and livelihood both are beginning to show green shoots of revival, economies have begun breathing again. The road to revival unfolds some speed-breakers as well as some fast lanes for every sector of the economy.

For lenders – both big and small – it has thrown up a challenge to bear the pain of the wound inflicted by the Corona virus and heal it to move on. Non-banking lenders, or the NBFCs, are in for a bumpier ride with a lot of blood set to spill out of default wounds. The sector has been facing repeated setbacks for the last several years but stayed resilient.

The Covid-19 pandemic and the disruption it triggered worsened the asset quality challenges the nonbanking financial companies had been facing since the outbreak of the 2019 IL&FS scam and the subsequent liquidity crunch. Piling up of bad debt also partially choked the supply of funds from banks through the last two years, while a sustained slowdown in economy worsened the situation further. Delinquencies have begun increasing across most retail asset classes of the sector, particularly commercial vehicles, small and medium enterprises and unsecured loans. Delinquencies over 90 days past the due date have more than doubled for most of the rated NBFCs in these asset classes for the nine months between April and December 2020.

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