homefinance NewsRBI’s new norms could lead to spike in NPAs for NBFCs: ICRA

RBI’s new norms could lead to spike in NPAs for NBFCs: ICRA

While the new norms are unlikely to affect regular banks that already comply with RBI norms, ICRA says NBFC NPAs could go up by 160-180 bps. Further, increased focus on collection could set back NBFCs' growth.

By CNBCTV18.com Nov 25, 2021 9:03:43 PM IST (Updated)


The Reserve Bank of India's revision of bad loan recognition and upgradation norms could bring a sharp spike in the non-performing assets (NPAs) for non-banking finance companies (NBFCs) in the country. Credit rating agency ICRA estimates that the new norms could take NBFC NPAs up by 160-180 bps whereas the spike in the case of house finance companies (HFCs) could remain somewhere between 60-80 bps over March 2021 levels.
On November 12, RBI gave a clarification on the income recognition, asset classification and provisioning IRAC norms for banks and NBFCs and All India Financial institutions (AIFIs). The key points included the classification of special mention accounts (SMAs) and non-performing accounts on a day-end basis, upgrade to an NPA to standard category only after the clearance of all outstanding dues and harmonisation of out-of-order status of cash credit (CC)/overdraft accounts and the treatment of delays in interest payment on a nine-day overdue basis.
Also read: Strict NPA rules for NBFCs: Experts analyse impact on industry
This means that NPAs can only be moved to the standard category if all the remaining dues are cleared by the borrower. The move, however, is unlikely to affect NPAs of regular banks that already comply with these norms.