Risks
Credit Risk: The primary risk for an NBFC, arising from borrowers defaulting on loans, leading to non-performing assets (NPAs) and impacting profitability.
Liquidity Risk: Dependence on market borrowings and challenges in raising funds, especially during periods of tight liquidity or market stress.
Interest Rate Risk: Fluctuations in interest rates can impact net interest margins, particularly for companies with asset-liability mismatches.
Regulatory Changes: Strict and evolving regulations from the RBI regarding capital adequacy, asset classification, and provisioning norms can impact operations and profitability.
Competition: Intense competition from banks and other NBFCs, which can lead to pressure on lending rates and margins.
Economic Downturns: A general slowdown in the Indian economy can reduce credit demand and increase default rates.