CRISIL says non-bank lenders have 950-bln-rupee repayments due Nov

At a time when non-banking finance entities and housing finance companies are under the scanner for liquidity and asset-liability mismatch issues, ratings agency CRISIL has said these entities have debt repayments worth 950 bln rupees due in November, of which commercial papers account for 700 bln rupees. While access to funding for non-bank lenders has been challenging in recent times, over the past two weeks, there has been some change in market sentiment with gradual easing in funding access, CRISIL said in a note on Thursday. “While some non-banks are well placed to meet debt repayments without drawing down on bank lines, others may have to do so, at least partially,” the agency said. In October, the 50 largest non-bank lenders rated by CRISIL rolled over only 40% of their average monthly CP issuances between June and August, and instead had to tap banks for funds. In the past, issuances by entities in the financial sector have typically been fully rolled over or refinanced on maturity. However, CP issuances increased in the last week of October, and if this trend continues, rollover rates should be higher in November, according to CRISIL. “Non-banks with strong parentage and those belonging to large corporate groups have managed to partially roll over their CPs and raise funds through bank loans to a greater extent compared with peers, although they have had to pay higher interest rates,” Krishnan Sitaraman, senior director at CRISIL, was quoted as saying in a note. “Selective lending by mutual funds means in the weeks ahead, continued access to, and timely bank funding will be critical for non-banks,” Sitaraman said. In the past one month, some non-bank lenders have found it difficult to quickly draw-down on bank lines, which led to some stress in terms of liquidity. Additionally, market sentiment remains challenging for select non-bank lenders that are into housing finance and wholesale lending. CRISIL says this has led to securitisation of loans emerging as a significant alternative to generating liquidity, especially for housing finance companies. Another funding avenue gaining traction is retail bonds, as non-bank lenders have already raised 270 bln rupees through retail bonds between April and September, compared with 50 bln rupees in 2017-18 (Apr-Mar). Further, such companies have curtailed disbursements in the recent months to conserve liquidity, due to which CRISIL expects growth for them to slow down in the near to medium term. “Given the situation on fund-raising and liquidity at the industry level, it bears re-emphasising that monitoring how the asset quality of the non-retail financing portfolios of non-banks pans out will be crucial,” it said. Even as recent steps to improve access to funds, by the Reserve Bank of India and the National Housing Bank, and large banks such as State Bank of India, have benefited non-bank lenders, further regulatory measures such as a standby liquidity line could help avert funding stress, the ratings agency said. Apart from access to funding, CRISIL said another monitorable would be the asset quality of such entities, which has remained largely steady in the recent past,  especially in the non-retail financing portfolio containing loans to small and medium enterprises, loans against property, and real estate developer loans. AjitVelonie, director at CRISIL, said while current delinquencies are not high, if the funding situation for non-bank lenders does not stabilise, asset quality challenges could manifest.