Non-banking financial companies have waded through the thick pandemic and muted demand. RBI, in its monthly bulletin for May said the sector registered slower but double-digit growth in September and December quarters of 2020-21 at 13 per cent and 11.6 per cent, respectively.

RBI, in its recent consultative document on regulation of microfinance, proposed to include a common definition of microfinance loans applicable to all regulated entities.

The Central Bank attempts to achieve a common process to arrive at the maximum permissible borrower indebtedness, by doing away with the cap on the number of lenders per borrower and pricing caps.

According to the Emkay Global Financial Services report, the sector has left behind the difficult phase and lenders are optimistic about an improved trend in collections due to the respite provided by the gradual unlocking of the economy.

RBI’s support towards restructuring of loans (even for small tickets) may result in a sharp surge in an overall restructured portfolio for most NBFCs, including vehicle financiers.

The credit card segment shows improvement as borrowers prefer to hold liquidity.

The report talks about brewing concern about a steep rise in stage II assets similar to last year. “The preference would be NBFCs with decent adequacy and diversified asset and liability mix,” it said.

As the nation did not witness severe lockdowns, many businesses remained partly functional with limited restrictions on the movement of goods and services.

The fully operational e-commerce channels helped businesses to ramp up activities and assume business-as-usual status in a short period.

“With most lenders moving toward digital models for collections, absence of physical connection has not been a real dampener,” the Emkay report stated.

In the automobile sector, the vehicle finance segment remained the most vulnerable, with private cars and 2Ws seeing normalisation in recoveries and commercial vehicle and passenger vehicle (including cab aggregators) loans remaining under stress.

“There is a pent-up demand for working capital loans which can trigger incremental credit growth post lockdowns,” the report said, adding that even though lenders see resilient demand for unsecured personal and business loans, they will prefer to tread cautiously in these segments.

Buyers from the retail segment with relatively better financing abilities are able to command a price. Losses for financiers can lead to slow repossessions in the CV segment.

Business recovery was halted during the second Covid wave, but there is a built-in optimism for recovery playing out with the gradual unlocking and improvement in macros.