Brokerages CLSA and IIFL, nonetheless, assured buyers that the impression of the proposals, even when made into rules, might not be a lot on the profitability of project financiers.It may nonetheless immediate them to replenish their capital to satisfy regulatory necessities.
On Monday, after dipping sharply in opening trades, PFC closed 8.9% down at Rs 438, REC closed 7.4% down at Rs 517 and Ireda closed 4.1% down at Rs 172.
According to a report by IIFL, infra-focused NBFCs like REC, PFC and Ireda can see a possible hit of 200-300 foundation factors (100 foundation factors = 1 proportion level) to their capital ratio. “Valuation of these NBFCs can also be potentially impacted,” the report stated.
Bankers say that RBI’s proposal to impose a 5% provision requirement on project loans may need been triggered by the anticipated credit score loss (ECL) norms, which require banks to make provisions primarily based on previous expertise of default. ECL norms are prudential pointers consistent with international finest practices.
“Whenever ECL norms are notified, banks will have to set aside provisions for defaults based on their experience, which means it could be over 5%,” stated a banker.
