According to Icra’s vice president and head (financial sector ratings) Manushree Saggar, the tepidness in infrastructure credit in first half of 2020-21 was primarily due to the sequential degrowth (10 per cent) in banking sector credit to the infrastructure segment.
However, non-banking financial companies-infrastructure finance company (NBFC-IFCs) continued to grow at a modest sequential pace of 12 per cent in this period, Saggar noted.
She said that the growth was majorly led by disbursements related to the liquidity package announced by the government for cash-strapped discoms.
The share of NBFC-IFCs in infrastructure credit has increased to 53 per cent as of September 30, 2020 from about 38 per cent five years ago, the report said.
The decline in share of banks during past few years was largely attributable to the conversion of their exposures to state distribution companies into bonds and subdued lending amid asset quality issues and capital constraints, it said.
At the same time, portfolio for NBFC-IFCs continued to grow though largely at the back of growth in the public sector NBFC-IFCs, it said.
As for asset quality, NBFC-IFCs witnessed a deterioration during FY2016-FY2018 on the back of severe stress in the thermal power sector. However, the trend over the past three years suggested receding asset quality pressures, particularly up to the onset of COVID-19-induced disruption, it said.
The gross stage 3 percentage had eased to 5.7 per cent as on March 31, 2020 from 7.3 per cent as on March 31, 2018, supported by controlled fresh slippages and some resolution in legacy stressed assets, the report said.
“The gross stage 3 percentage for NBFC-IFCs eased further to four-year low of 5 per cent as on September 30, 2020, partly aided by limited forward bucket movement amid the prolonged moratorium period,” it added.
It said while more clarity on the impact of COVID-19-induced disruption on asset quality trajectory will emerge over coming quarters, most infrastructure sub-sectors remained relatively resilient from debt servicing perspective in lockdown conditions supported by factors such as must-run status of renewable energy projects, healthy recovery in toll collections, liquidity support to discoms.