Power finance companies may be hurt by new NBFC provision norms…

As per the note published by Bank of America Merrill Lynch, the Reserve Bank of India panel's new recommendations on lending and provisioning rules for non-banking financial companies could hurt power sector finance companies such as Power Finance Corp (PFC), Rural Electrification Corp (REC) as well as others like IDFC, Shriram Transport and Manappuram Finance which currently classify NPLs under 180-day norms.

 
Only Indiabulls Financial Services Ltd and Reliance Capital follow the proposed 90-day norm, the note said. In order to comply with the new rules, PFC and REC could have to provide for on standard assets (~25bps), "which could hurt their earnings in the medium term", the Wall Street bank said in a note.

Shriram could see NPLs more than doubling (to+5.3-5.5 per cent) from present and previous cover come-off (82% now), but they could also be allowed to do so in a phased manner "assuming the worst case, if not in a phased manner, then the impact on FY13 earnings for Shriram could be +3-5 per cent," BofA added.