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Hans India
19 hours ago
- Business
- Hans India
RBI's new rule on gold loans to change mkt dynamics
New Delhi: The RBI's new rules on lending against gold will lead to business model adjustment, and operational agility, service excellence will remain the key differentiator between lenders, S&P Global Ratings said on Thursday. Earlier this month, the RBI raised the loan-to-value (LTV) ratio for lending against gold to 85 per cent for borrowings under Rs 2.5 lakh from the present 75 per cent. The LTV ratio has been fixed at 80 per cent for loan amounts between Rs 2.5-5 lakh and 75 per cent for loans above Rs 5 lakh. Lenders have time until April 1, 2026, to prepare for the changes. In its report titled 'India's new rules on gold-backed loans may reshape the competitive landscape', S&P said the Reserve Bank of India's new rules on gold-backed loans will likely lead to business model adjustments in the country's booming lending niche. 'In our view, operational agility and service excellence will remain the key differentiator between lenders,' S&P said. S&P Global Ratings credit analyst Geeta Chugh said NBFCs need to develop risk management policies and processes to evaluate borrowers' repayment capabilities based on income and cash flows. 'Traditionally, they have relied on collateral valuation. Bridging the skill gaps to hire and train loan officers on assessing repayment ability is both an upfront cost and an hurdle to overcome for these lenders,' he said.
Hans India
27-05-2025
- Business
- Hans India
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.
India Gazette
26-05-2025
- Business
- India Gazette
S&P Global Ratings projects strong growth for Indian PSU nonbank financial institutions
New Delhi [India], May 26 (ANI): India's government-owned non-bank financial institutions are expected to grab more market share in the coming year or two, according to S&P Global Ratings. It projected a sustained strong growth for the government-owned non-bank financials. According to a report titled 'Indian Government-Owned Financial Institutions: In The Fast Lane,' these firms' roles in supporting economic development will strengthen their franchises. '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,' said Deepali Seth-Chhabria. Government-owned entities dominate the financial sector in India. Many state-owned nonbanks operate in segments that are of national interest. 'We expect loan growth for financial GREs to stay at about 15 per cent per annum over the next two years, aided by mandates to drive the development of strategic sectors,' said the report. They expect relatively higher growth for entities like the National Bank for Financing Infrastructure and Development (NaBFID); and the Indian Renewable Energy Development Agency Ltd. (IREDA), both of which are expected to scale up their business from a low base. '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,' Geeta Chugh added. 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. (IRFC; BBB-/Positive/--) and the Export-Import Bank of India (EXIM; BBB-/Positive/A-3),' it noted. In contrast, Power Finance Corp, REC, and IREDA make higher margins as they lend to relatively weaker borrowers, the S&P report added. (ANI)
