The recent rains and floods ravaged all the 14 districts of Kerala with damage most severe in 7 districts \u2013
\nAlappuzha, Ernakulam, Idukki, Kottayam, Pathanamthitta, Thrissur and Wayanad \u2013 which the state government\u00a0has notified as flood \/ landslide affected. And the road to recovery would be long and arduous.\u00a0Any rating or outlook change will be announced subsequently.<\/p>\n
A credit alert is CRISIL\u2019s opinion on a specific development. It conveys that CRISIL will revert shortly on the
\nimpact of the development on the ratings of those affected.<\/p>\n
CRISIL-rated NBFCs include gold loan financiers, microfinance institutions (MFIs), and providers of home, twowheeler\u00a0and commercial vehicle loans. Apart from these segments, CRISIL-rated banks also have significant
\nexposure to micro, small and medium enterprises (MSME) segment in the state.<\/p>\n
The near-term impact of loss of business, and low collection efficiency will be felt by all lenders as the flood
\naffected borrowers would prioritise normalcy in life. The lenders would also seek to restore normal operations,
\nincluding infrastructure, at their branches. Some MFIs and small finance banks (SFBs) had suspended
\ncollections till August 31, 2018.<\/p>\n
The State Level Bankers\u2019 Committee, Kerala, has announced a moratorium and rescheduling for crop loans,
\nagri-allied activities, loans to micro and small enterprises and education loans. Additionally, loans to medium
\nenterprises and housing loans are eligible for need-based moratorium and rescheduling. CRISIL understands
\nthat the recovery proceedings that have already started will also be stopped for three months.<\/p>\n
The longer-term impact of the floods will depend on the product segment the entity is operating in. The MFI
\nsegment will feel the most pressure given the weakened credit quality of their borrowers. The loss of incomegenerating\u00a0assets and savings, and the unanticipated damages caused by the floods, could impair the debtservicing\u00a0ability of borrowers. Consequently, delinquencies are likely to rise. The ability of MFIs to recover dues
\nwill depend a lot on the extent to which they engage with borrowers.<\/p>\n
Two CRISIL rated, Kerala-focused banks have over 35% of their loan advances in the state. Their MSME\u00a0exposure, particularly in the manufacturing sector, is likely to be most affected on account of likely loss of\u00a0inventory and time required to restart operations. Therefore, delinquencies are expected to rise in this segment.\u00a0But the long-term impact is not expected to be significant given the established nature of relationship with\u00a0borrowers and reasonably high level of collateralisation.
\nThe impact on vehicle and housing financiers would be minimal because of the secured nature of loans. Even
\nin case of loss of vehicle or property, insurance proceeds that lenders receive directly will mitigate the risk to
\nsome extent.<\/p>\n
Gold loan financiers would be least affected as they possess precious jewellery as collateral. Financiers may
\nnot resort to auctions immediately but if delinquencies continue to rise and stay elevated, they could do so.
\nCRISIL remains in discussions with the affected parties and will review the impact on their credit risk profiles.<\/p>\n","protected":false},"excerpt":{"rendered":"
The recent rains and floods ravaged all the 14 districts of Kerala with damage most severe in 7 districts \u2013 Alappuzha, Ernakulam, Idukki, Kottayam, Pathanamthitta, Thrissur and Wayanad \u2013 which the state government\u00a0has notified as flood \/ landslide affected. And the road to recovery would be long and arduous.\u00a0Any rating or outlook change will be […]<\/p>\n","protected":false},"author":3,"featured_media":1968,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_monsterinsights_skip_tracking":false,"_monsterinsights_sitenote_active":false,"_monsterinsights_sitenote_note":"","_monsterinsights_sitenote_category":0,"_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[31],"tags":[1478,739,1477,1480,1476,1479],"class_list":["post-1967","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-news","tag-agri-allied-activities","tag-crisil","tag-crop-loans","tag-education-loans","tag-kerala-floods","tag-loans-to-micro-and-small-enterprises"],"aioseo_notices":[],"yoast_head":"\n