Non-bank lenders showed some resilience before economy imploded in March

Non-bank finance companies projected some resilience in the three month to March, continuing their path to improve asset quality from the depths in 2020 only to be met with the worst economic crisis which threw their subprime borrowers from the frying pan to fire. 

According to the industry data released by the Central Bank, the non-bank lending group continued to cut its gross Non-performing loans (GNPLs) ratio to 9.11 percent from 11.00 percent in December 2021 and 14.14 percent in June 2020 when the sector asset quality plunged to its lowest in the recent history. 

Although the sector started to gradually upend the trajectory from its 2020 depths through the most recent financial quarter ended March 2022, the sector has again caught up in the worst downturn in their entire history which could plunge their asset quality into fresh lows, as both the banking and financial sector are bracing for a fresh wave of defaults from next month onwards. 

The situation could exacerbate the already sour asset quality indicators of the sector which caters mostly to subprime borrowers whose economic fortunes could flip faster than the rest of the economy. 

Non-bank finance sector comprises of licensed finance companies which can receive deposits and the specialised leasing companies which have the license to mobilise deposits for their lending, but mostly depend on bank borrowings and other forms of local and overseas funding lines. 

The licensed finance company segment, which is the largest out of the two groups reported their GNPLs ratio at 8.99 percent by the end of March 2022 from 10.81 percent three months ago and 14.31 percent in June 2020. 

The specialised leasing companies as a group reported their GNPLs ratio at 13.72 percent from 18.52 percent in December 2021 and 19.30 percent in September 2021 
at its lowest.