Govt-owned NBFIs in for strong growth

New Delhi: Government-owned nonbank financial institutions in India will likely gain more market share in the coming year or two since they play a key role in supporting economic development as part of the country's official policy, according to an S&P Global report released on Monday.
'Financial services is one of the four strategic sectors in India. As such, Government-Related Entities (GREs) in the sector are more likely to benefit from government support,' said S&P Global Ratings credit analyst Deepali Seth-Chhabria.
'This is particularly so for those that play policy roles. In our view, government linkages provide financial flexibility, access to cheaper funding, and a mechanism for asset quality support,' she added.
GREs dominate the financial sector in India. Many nonbank GREs operate in segments that are of national interest. The loan growth for financial GREs is expected to stay at about 15 per cent per annum over the next two years, aided by mandates to drive the development of strategic sectors, according to the S& P report titled 'Indian Government-Owned Financial Institutions: In The Fast Lane.' A relatively higher growth is expected for entities like the National Bank for Financing Infrastructure and Development (NaBFID; unrated) and the Indian Renewable Energy Development Agency Ltd, both of which are expected to scale up their business from a low base, according to the report.
'Asset quality is a mixed bag. Some nonbank financial institutions are exposed to weak borrowers, though sovereign exposure and guarantees from the government partially mitigate the risk,' said S& P Global Ratings credit analyst Geeta Chugh.
'Credit costs for the sector have improved and are better than peers'. However, we expect credit costs for the sector to rise as their loans season, recoveries dwindle, and benefit of excess provisions created in previous years tails off.' Earnings are moderate for the development financial institutions, including those that focus on small industries (SIDBI) agriculture (NABARD), and housing (NHB). The same follows for the two financial GREs in India we rate, Indian Railway Finance Corp. and the Export-Import Bank of India.
These entities tend to have weak margins despite their lower cost of funding. Margins are constrained by the entities' policy roles. Some operate on cost-plus basis while others have a cap on lending margins for the refinance business, the report points out.

Try Our AI Features

Explore what Daily8 AI can do for you:

Learn with AIFact CheckingText to SpeechAI Summary

Related Articles

Time of India

an hour ago

• Time of India

Bullets, gunpowder gutted as fire hits Verna ammo company

Vasco: Bullets and gunpowder were gutted in a major fire that broke out at Hughes Precision Manufacturing Pvt Ltd, at IDC Verna early on Saturday. Verna fire station in charge Dilesh Gaonkar told TOI that the fire broke out around 4am, and the firefighters received a call from the headquarters about the accident around 4.10am. 'Live and spent bullets and gunpowder stored in one room of the company were destroyed by the flames,' Gaonkar said. 'Boxes containing ammunition turned to ashes, but luckily no casualties were reported.' He said that fire tenders were pressed into service from Verna, Vasco, Margao, and Panjim. 'According to the company's officials, CCTV cameras captured smoke coming out of the storage room,' Gaonkar said. 'The preliminary probe has suggested that a short circuit could be the reason for the massive fire.' Gaonkar said that the Verna fire station has asked the company to provide details on the materials gutted and the loss incurred in the fire. Sources said the loss could run into crores. The company supplies ammunition to the Indian defence forces. The fire tenders were deployed at the company site till late on Saturday. 'Although we succeeded in extinguishing the flames, we are monitoring the site,' Gaonkar said.

Time of India

an hour ago

• Time of India

I-T raid unearths gold smuggling and hawala transactions

Kozhikode: The Income Tax (I-T) department conducted searches at multiple premises of Seashell Savoury Group and Pulikkal Group in Kozhikode on Saturday allegedly revealing hawala transactions, reverse hawala, gold smuggling, unreported foreign investments, underreported land purchases in cash and other undisclosed financial activities. The I-T department said that the findings at multiple locations point to large-scale tax evasion and concealment of income and assets both in India and abroad. Search was conducted at the residential and business premises of Abdu Razakh Pulikkal, Rasheed Ali Pulikkal, Ahammed Kabeer Pulikkal. Details of foreign dividends received over the years were unearthed in the raid. "Clear evidence of the use of hawala channels to send money amassed abroad to India was uncovered. Undisclosed investments in several buildings, land, and illegal quarries/crushers were found," it said. Sales suppression over the years was quantified from the offices of Delicia Group. "Details of income from GCC region transferred to Indonesia for purchases were also uncovered," it said. Searches were also conducted at the residential premises of Hameed Narikolil, Kunhimoosa and their business premises. It says that the group has revenue from hotel businesses both in India and abroad. It operates more than 80 hotels in the GCC region, owned and managed by Indian residents but not disclosed for taxation in India.

First Post

an hour ago

• First Post

FATF links dual-use equipment seized by India to Pakistan's missile programme

A dual use equipment seized by India from a Pakistan bound merchant vessel in 2020 is linked to Islamabad's National Development Complex that is involved in the country's missile development programme, a new report by the Financial Action Task Force has said. read more India's 2020 seizure of Pakistan-bound dual-use equipment has been linked to Islamabad's missile development programme, according to a new report by the Financial Action Task Force (FATF). The equipment, intercepted from a merchant vessel is associated with Pakistan's National Development Complex, a key entity involved in the country's missile development. FATF, the global financial watchdog, referenced the case in its latest report, which outlines risks and vulnerabilities in the international financial and trade systems. The incident was cited under a section highlighting the misuse of the maritime and shipping sectors to move sensitive goods, including dual-use items that can be repurposed for weapons programmes. STORY CONTINUES BELOW THIS AD 'In 2020, Indian custom authorities seized an Asian-flagged ship bound for Pakistan. During an investigation, Indian authorities confirmed that documents mis-declared the shipment's dual-use items,' the FATF report said. 'Indian investigators certified the items for shipment to be 'Autoclaves', which are used for sensitive high energy materials and for insulation and chemical coating of missile motors,' the report said. It said these sensitive items are included in dual-use export control lists of the Missile Technology Control Regime (MTCR). The bill of lading of the seized cargo provided evidence of the 'link between the importer and the National Development Complex, which is involved in the development of long-range ballistic missiles,' it said. The export of equipment such as the autoclaves without formal approval from various authorities is a violation of existing law, the FATF said. Pakistan's National Development Complex (NDC) has played a crucial role in the development of Pakistan's missile programme. India had seized the dual-use equipment from merchant vessel Da Cui Yun at Kandla port in Gujarat on February 3, 2020. The Indian customs authorities had stopped the vessel for wrongly declaring an autoclave, which can be used in construction of missiles, as an 'industrial dryer'. The report said that significant vulnerabilities remain across the global financial system in countering the financing of weapons of mass destruction (WMD). STORY CONTINUES BELOW THIS AD 'Despite the grave threat posed by proliferation financing (PF), only 16 per cent of countries assessed by the FATF and its global network have demonstrated high or substantial effectiveness' in a process that evaluates the implementation of targeted financial sanctions under the United Nations Security Council resolutions on proliferation. The report said that unless the public and private sectors urgently bolster technical compliance and effectiveness, those seeking to finance WMD proliferation will continue to exploit weaknesses in existing controls. The report provided a detailed analysis of the evolving methods and techniques used to evade PF-related sanctions. 'Illicit actors are employing increasingly sophisticated methods to evade sanctions and circumvent export controls,' it said. With inputs from agencies