While loan collections by Indian nonbank lenders improved in the first half of 2020-21 (Apr-Mar), delinquencies are seen rising at Indiabulls Housing Finance Ltd and IIFL Finance Ltd, Moody's Investors Service said. Various measures taken by authorities, including a six-month moratorium on loan repayment, prevented a sharp deterioration of asset quality at the lenders, according to the rating agency.

 "However, we expect delinquencies will eventually increase at IIFL Finance and Indiabulls (Housing Finance) once the support programmes end, given the severity of the pandemic's impact on India's economy," Moody's said. Weakening the asset quality of these two lenders will lead to rise in credit cost and hurt their profitability. However, modest loan growth and growth in loan assignments, or loan sales to banks, will help them maintain capitalization.

In sharp contrast, Moody's believes thatMuthootFinanceLtd's robust profitability will help it maintain capitalisation and funding at the strong current level. The company witnessed improvements in profitability and asset quality as a surge in gold prices aided loan recoveries and disbursements.

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