By IANS,
Chennai : Indian non-banking finance companies (NBFC) will benefit from the enhanced corporate governance and disclosure standards as well as tightened liquidity management measures proposed by the central bank, credit rating agency India Ratings has said in a report.
The agency also expects a limited financial impact on NBFCs from the proposed revisions in asset classifications and provisioning norms and tier I capital ratio requirements.
According to India Ratings, the increased corporate governance standards would improve investor confidence and enhance capital market access for large NBFCs.
“The draft guidelines include stricter rules on appointment, continued eligibility and responsibilities of directors and comprehensive disclosures requirements on asset quality, asset-liability profile and off-balance sheet exposures, among others,” India Ratings said.
While India Ratings see high core capital ratios at NBFCs, it does not expect any significant impact on the operating performance of the requirement of a minimum tier I capital ratio of 10 percent.
According to the agency, the high net interest margin at most NBFCs can easily absorb the impact of incrementally holding low-yielding assets.
“The transition of NBFCs to the 90-day non-performing assets (NPA) norm from Q1 FY16 (same as at banks) from a 180-day NPA norm is unlikely to have a significant impact on NBFCs’ profitability in the medium term,” said India Ratings.
According to it, the credit ratings assigned to NBFCs already incorporate some of the key proposed changes on asset quality, capitalisation, liquidity stress and corporate governance and disclosure requirements.
Hence, we do not expect the proposed changes to impact the ratings of the rated NBFCs, said India Ratings.