- The on-book portfolio stood at ₹12.7 lakh crore at the end of June 2022, up from ₹11 lakh crore in the previous year.
- The high growth in Q1 was due to moderate growth in the same period last year,
- The ratings agency pegs the full-year portfolio growth between 10-12%.
- ICRA also said that asset quality also witnessed an improvement during Q1 FY23.
Overall, housing finance companies’ on-book portfolio stood at ₹12.7 lakh crore at the end of June 2022, up from ₹11 lakh crore a year ago.
“The growth was driven by the healthy demand in the industry and the increasing level of economic activity. Going forward, demand is expected to remain firm,” said Sachin Sachdeva, VP and sector head – financial sector ratings, ICRA, while retaining growth and asset quality estimates for FY23.
However, the boost from the low base effect in Q1, combined with the rising interest rates, could result in a slightly lower pace of growth in FY23 than Q1 – the ratings agency pegs the full-year growth between 10-12%.
According to a Livemint report, the weighted average increase in interest rates on fresh rupee loans from banks between April and August 2022 stood at 82 bps.
The RBI has increased the repo rate by 190 bps so far this year in an effort to tackle rising inflation, which stood at 7.41% in September. Following the rate hikes, the current repo rate stands at 5.9%.
Asset quality improvements to continue
Housing finance companies (HFCs) have seen a moderate improvement in their asset quality during Q1 FY23. The gross non-performing assets (GNPA) ratio declined to 3.1% as of end June 2022, from 3.2% at the end of March 2022, according to the agency.
The report adds that this improvement was due to two reasons – an increase in the on-book portfolio, and recovery in the non-housing segment of some large HFCs, allowing them to buck the trend of increasing GNPAs in the first quarter of a financial year.
The growth in the June quarter also helped HFCs reduce their standard restructured book to 1.3% of assets under management (AUM) in end June 2022, from 1.7% in end March.
Restructured standard book refers to those loans which have been restructured by a modification of the credit terms while maintaining the “standard asset” tag.
“The improvement in GNPAs in Q1 FY2023 was driven by improvement in GNPAs of some large HFCs and it was not broad based. Nevertheless, ICRA expects further improvement in FY2023 and retains its GNPA estimate of 2.7-3% by March 31, 2023,” Sachdeva added.
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