CRISIL-rated NBFCs’ improve core profitability
indicators
CRISIL-rated NBFCs have exhibited a sharp improvement in
their core profitability between FY2000-01 and FY2000-
03$. Their core profitability, as measured by the net
profitability margin (NPM)$$, rose from 0.77 per cent in
FY2000-01 to 1.90 per cent in FY2002-03, mainly because
of higher interest spreads given the relatively higher decline
in interest costs vis-à-vis the fall in business yields in this
period. The marginal increase in their fee income and strict
overhead cost controls, especially by NBFCs engaged in
vehicle financing, have also helped to enhance their
profitability.
Asset quality maintained despite rising business
volumes
The larger CRISIL-rated NBFCs have continued to grow their
business volumes in spite of stiff competition from banks.
But their growth rates have varied as most of them have
not been able to keep pace with banks in the retail
businesses of car, commercial vehicle and two-wheeler
financing and personal loans. As a result, banks have made
higher incremental disbursements.
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* CRISIL’s estimates of levels for 1999-2000
** CRISIL’s estimates of existing levels
*** CRISIL’s estimates
# Computed as follows: {(Interest cost of deposits + 70% of operating
expenses)-Yield on regulatory investments)*Proportion of regulatory
investments}. SLR and CRR assumed to be = 25% and 9.5%
respectively in the earlier scenario and 25% and 4.5% respectively in
the current scenario.
## All numericals are based on CRISIL estimates.
### Assuming that 30% of operating costs can be considered as incurred in
raising resources on an aggregate basis for such NBFCs
$ Refer to CRISIL’s opinion piece: “Core Profitability of CRISIL rated
NBFCs shows sharp growth”
$$ Net Profitability Margin = Interest spread – Overheads + Core Fee
Income
