India’s Leading BFSI and FinTech Companies 2021

23 Rising Significance and Consolidation within the Indian NBFC Sector According to RBI’s regulatory guidelines, only those NBFCs with minimum Net Owned Funds (NOF) of ` 20 mn are allowed to operate. FY19 witnessed a record number of cancellations/surrender of licenses owing to non-compliance with these guidelines. Likewise, FY20 also saw cancellations, albeit on a much smaller scale. As of 16 July 2020, there were 9,618 NBFCs registered with the RBI as compared to 9,856 as of 30 March 2019. 0 200 400 600 800 1000 1200 1400 1600 1800 2000 FY15 FY16 FY17 FY18 FY19 FY20 FY21 (upto September) Regi stration&Cancellation of CoR andNBFCs Registration Cancellation NBFCs have been steadily gaining prominence in the Indian financial system over the years. NBFCs’ Credit-to-Gross Domestic Product (GDP) ratio or credit intensity has witnessed a steady rise in the last few years, touching its peak in FY19. It, however, moderated in FY20 on the heels of the ongoing COVID-19 pandemic. NBFC’s credit as a ratio to SCB’s non-food credit also witnessed sharp growth, especially between 2017 and 2019. Subdued Financial Performance during FY20 During FY20, the performance of NBFCs remained subdued amid challenging macroeconomic conditions, largely owing to the pandemic as well as weak demand resulting from risk aversion, liquidity stress and escalating borrowing costs in the wake of the IL&FS episode, all of which culminated in substantial deceleration in asset growth during the year. The consolidated balance sheet size of the NBFC sector grew from ` 31.1 trillion in FY19 to ` 33.9 trillion in FY20, which marks a significant moderation in financial performance after double-digit balance sheet growth logged in the preceding three years. This was more pronounced in the case of NBFCs-ND-SI, while NBFCs-D continued to grow at a healthy rate. Going forward, however, performance improved in FY21 (up to September) with NBFCs-ND-SI gaining traction on account of an uptick in loans and advances and the base effect. Asset Quality of NBFCs During FY20, the asset quality of NBFCs deteriorated amid rising slippages. Efforts were undertaken by NBFCs to clean up their balance sheets, which is reflected in improved recovery and written-off ratios. Non-Performing assets (NPAs) are classified as sub- standard, doubtful and loss assets based on the duration for which an asset remains non-performing. Since FY19, the proportion of standard assets has declined, as slippages to sub-standard category has increased. In FY20, doubtful assets also increased marginally while the share of loss assets remained constant. Going into FY21, the first half of the fiscal witnessed further decline in standard assets while the proportion of doubtful and loss assets increased. 0.3 0.08 0.07 0.52 0.1 0.13 Sli ppage Ratio Recovery Ratio Wr itten-off Ratio Sl i ppage, Recovery&Wri tten-off Ratios (%) FY19 FY20 Dun & Bradstreet

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