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Non-bank lenders are seeing business recovery with greater collection efficiency, aided by the continuing economic revival and a steady flow of liquidity.

Loan disbursements in the March quarter of FY21 are likely to be at pre-covid levels, analysts at Motilal Oswal said in a note on Tuesday.

“Across product segments, there continues to be a month-on-month improvement in collection efficiency. Companies are also witnessing movement to the lower days past due (DPD) segment from the higher DPD segment, leading to a lower provisioning requirement," the note said, adding there is a likelihood of higher write-offs to clean the books.

Stable liquidity scenario, coupled with a lag in the impact of a fall in the marginal cost of funds, led to an improvement in spreads, it said.

“Over the past few months, steady improvement across all important parameters has been encouraging. We continue to favour players with strong balance sheets and those least impacted by the ensuing covid-19 lockdown," it said.

The growth momentum for housing finance companies is also picking up. The report added that home sales across geographies witnessed a sharp recovery in the past few months, driven by discounts, record low interest rates, and stamp duty cuts in some states.

“Most players have nearly stopped fresh corporate sanctions and are undertaking ‘retailization of the balance sheet’ as the primary business strategy now. The affordable housing segment is seeing a strong traction and the retail lending segment remains resilient on the collection efficiency side," it said, adding that the non-retail segment remains a key monitorable, going ahead.

Analysts at Kotak Institutional Equities said that the fourth quarter was a strong quarter for non-banking financial companies (NBFCs), with disbursements picking up sequentially across the board, driven by moratorium exit, and pent-up, seasonally strong demand.

“While disbursements were strong, loan growth may be muted. Weak new business momentum in the first half of FY21 will likely drag loan growth for the next few quarters and bottom out sometime in FY22," the Kotak Institutional Equities report said on Tuesday.

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