Unsecured business loans showing early signs of stress: India Ratings
India Ratings has said.
The agency is seeing continuing pressure on cash flows in certain end-borrower segments, on-field attrition, lower-than-expected recoveries leading to higher write-offs and overleveraging of borrowers in the unsecured business loan portfolio.
“While the denominator effect was playing out over most of FY24, the need to recognise the rising delinquencies, provide for them and write-off the same has increased the credit cost pain since 4QFY24,” the agency said.
With the near-term profitability taking a hit, the agency is closely monitoring the developments in the sector and believes that the situation is still not alarming as leverage is at reasonable levels, it said.
Traditional non-bank finance companies (NBFCs) operating through the brick-and-mortar model as well as fintechs extending unsecured business loans are showing signs of increase in their delinquency levels.
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