Risks
Asset Quality Deterioration: Non-Performing Assets (NPAs) arising from borrower defaults pose a significant risk, impacting profitability and capital.
Interest Rate Fluctuations: Changes in interest rates affect both funding costs and the yield on assets, impacting net interest margins.
Funding & Liquidity Risk: Reliance on market borrowings makes the company susceptible to funding cost increases or liquidity crunches, especially during periods of economic stress.
Intense Competition: The presence of numerous banks and NBFCs creates fierce competition for both borrowers and funding, potentially pressuring margins.
Regulatory Changes: Evolving regulations from the RBI regarding NBFC operations, capital adequacy, and asset classification can impact business models and compliance costs.
Economic Slowdown: A general economic downturn can reduce credit demand and increase default rates.