India Ratings: RBI’s new norms likely to increase NBFCs’ bad loans by one-third

However, NBFCs would person to put successful systems and processes to comply with regular stamping requirements, India Ratings said, adding that it understands that NBFCs person presented to the RBI for providing a modulation play connected this requirement.

Non-banking concern companies (NBFCs) volition apt spot astir one-third emergence successful their non-performing assets (NPAs) aft the Reserve Bank of India’s (RBI) latest clarification connected upgradation of non-performing non performing assets (NPAs) kicks in.

On November 12, the cardinal slope said indebtedness accounts classified arsenic NPAs whitethorn beryllium upgraded to ‘standard’ assets lone if the full arrears of involvement and main are paid by the borrower. The regularisation volition use to some banks and NBFCs.

India Ratings said NBFCs volition apt person humble interaction connected provisioning due to the fact that of the clarification arsenic specified lenders are utilizing Indian Accounting Standard (IND-As), and mostly for higher-rated NBFCs, proviso argumentation is much blimpish than income recognition, plus classification (IRAC) requirements. However, NBFCs would person to put successful systems and processes to comply with regular stamping requirements, India Ratings said, adding that it understands that NBFCs person presented to the RBI for providing a modulation play connected this requirement.

“Accounts tin get into NPA class conscionable for a day’s hold successful paying the instalments and erstwhile it gets categorised arsenic NPA it volition not beryllium capable to go modular unless each the arrears are cleared. So, successful different words, accounts would get categorised arsenic NPAs astatine a faster gait and would stay sticky successful that class for a longer play of time. Both these accounting treatments would effect into higher header fig for NBFCs. It whitethorn truthful hap that NBFCs would disclose NPA numbers arsenic per IRAC norms and signifier 3 numbers arsenic per Ind-As separately successful their disclosures,” India Ratings said.