RBI Extends Deadline For Asset Classification; NBFC Stocks Rally: 5 Key Points

RBI on Tuesday had prolonged the time restrict for asset classification until September 30, 2023.

Reserve Bank of India (RBI) has allowed some rest for lenders -- together with non-banking monetary corporations (NBFCs) -- to adjust to its new laws for upgrading non-performing belongings (NPAs) as normal ones however upon clearing all dues. The Reserve Bank on Tuesday had prolonged the time restrict for asset classification until September 30, 2023 as in opposition to the earlier deadline of December 31, 2021.

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NBFCs shares rallied as Mahindra and Mahindra Financial Services surged 4.52 per cent, IIFL Finance Ltd gained 2.25 per cent, Poonawalla Fincorp closed 1.54 per cent larger, L&T Finance Holdings jumped 1.18 per cent, Shriram Transport Finance Corporation moved 0.91 per cent larger, Shriram City Union Finance climbed 0.56 per cent and Power Finance Corporation rose 0.58 per cent.
As per the RBI norms, mortgage accounts categorized as unhealthy loans or NPAs could also be upgraded as "standard" belongings provided that your complete arrears of curiosity and principal are paid by the borrower.
The new RBI round, issued in November, additionally makes it obligatory for all lenders to particularly point out -- within the mortgage agreements -- the precise due date of a mortgage and the breakup of the principal and curiosity, amongst others, as an alternative of mentioning due dates, which leaves scope for interpretation.
Umesh Revankar, Vice-Chairman and Managing Director, Shriram Transport Finance: "In a welcome move, RBI has given NBFCs more time to adhere to new norms for upgradation of NPAs to standard assets. The new NPA upgradation guidelines would have led to a spike in NPAs for NBFCs and hence there would have been a need for higher provisioning. We are glad for the extension given by the RBI as it will give more time to NBFCs and also it will put less pressure on the overall borrowers' credit profile."
YS Chakravarti, Managing Director and Chief Executive Officer, Shriram City: "The RBIs NPA recognition norm extension will give some breather to NBFCs bottom line in Q4 FY22 (quarter ending March 2021-22). Most NBFCs have already absorbed the impact in their third-quarter (Q3) FY22 results. The clarification by RBI only defers the adoption of the new norms. Reversing of provisions already made, although now permitted is unlikely to be the route that NBFCs may follow due to accounting complexities. For Shriram City Union Finance there will be no impact since our loan book is already well provided for. Further, given the strength of our collection efficiency, we expect our delinquencies to progressively reduce in 2023."