Cash-strapped NBFCs halve lending in September-October

11 November 2008

Mumbai: Non-bank finance companies (NBFCs), burdened by their short-term repayment obligations to mutual funds (MFs), have more than halved their lending in the past two months, credit rating agency Crisil said in a report released on Monday.

The fall in loan disbursements have gone up to 70 per cent at least in one case, while average disbursals have been around 50 per cent, Crisil said.

The Crisil study, based on the performance of 33 NBFCs that account for around 30 per cent of total non-banking finance business in the country, showed a marked deterioration in the business of asset finance companies.

Average monthly disbursements during September and October are estimated to be half of the disbursements in August.

NBFCs' share in the overall retail finance has come down over the past few years while banks with better access to cheaper funds saw themselves dominating the section.

Banks now account for more than two-thirds of retail finance disbursements, up from about 20 per cent in 2002 and Crisil expects the trend to continue.