Home Financiers PNB Housing Ltd. Y Can Fin Homes Ltd. They are taking steps to protect their businesses against bad loans that are expected to grow in an industry struggling with defaults and unpaid fees.
PNB Housing, for example, is betting on selling more of its corporate developer loans to ensure that absolute non-performing assets for the segment do not increase further. “We will not be spending more on the segment in the foreseeable future and we certainly do not intend to sell a portion of this asset in the coming weeks,” Kapish Jain, its chief financial officer, told BloombergQuint in an interview.
The company has already sold Rs 2.3 billion in corporate loans in the 2019-20 financial year, it said. However, the retail segment of loans, especially those taken by salaried professionals, is safe according to Jain. “Among all the liabilities, the one with the highest priority would be mortgage credit,” he said. While the industry will see an increase in bad loans, PNB Housing Finance does not expect to be affected by it.
This comes at a time when the Reserve Bank of India has put lending companies on hold for six months to ease the financial burden on people paying EMI. During the first three months, 50% of India’s loan portfolio was under default, raising concerns about potential bad loans if borrowers are unable to repay accumulated installments. However, only 30% of the loan portfolio has availed itself of the option to delay payments, Jain said.
To be sure, home financers are expected to be relatively better among non-bank lenders, according to most brokers, including Centrum Broking and Edelweiss Research.
Even so, the industry will continue to experience some pain, according to Girish Kousgi, managing director of Can Fin Homes. He plans to focus on keeping the quality of the company’s assets above liquidity or growth, which will be “key for companies to survive.”
“Asset quality will definitely be a challenge for everyone; it’s about the degree of challenge, ”Kousgi said.
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