India Ratings and Research (Ind-Ra), a leading research agency, has revised the outlook on commercial vehicle loans to stable to negative for FY18 from stable for FY17. The agency believes that the combined effect of the marginal 0.4 per cent yoy growth in industrial activity and 8 per cent increase in diesel price without a similar improvement in freight rates over April to November 2016 will stall the asset quality recovery process, which has been made more uncertain because of demonetisation.
The agency has revised the outlook on the loans against property segment to stable to negative for FY18 from stable in FY17. The agency expects that the prevailing slowdown in property prices with high levels of existing inventory and the pressure to move towards a formal business model will continue to weigh on small and medium enterprises, increasing asset quality pressures for them.
The rating firm has revised the outlook on tractor loans to stable to negative for FY18 from stable in FY17. The prospect of a strong agricultural production output in 2017 amid a healthy monsoon in 2016 is likely to provide respite to tractor loan borrowers. Also, budgetary support to farm income as announced in the Union Budget 2017-2018 and the average 16 per cent hike in minimum support price for food grains in FY17 YTD (the highest in last five years), blunted to some extent by the hike in diesel prices, would support asset quality improvement.
Ind-Ra has revised the outlook on CE loans to stable for FY18 from negative in FY17. Ind-Ra expects the 21 per cent and 24 per cent yoy growth in infrastructure spending in FY16 and FY17, respectively, to mark FY18 as a turnaround year for CE loans.
The agency has assigned a stable to negative outlook on microfinance loans for FY18. Ind-Ra expects that the marginal increase in agri and non-agri based rural wages in FY17 shall provide limited boost to MFI (microfinance institutions) borrowers’ income, because of growing borrower leverage and hence it is likely to cause asset quality issues.