IIFL Finance Asset Quality, Profit Challenges: Fitch

New Delhi, Feb 24 (PTI) Weakening loan quality and narrower interest spreads may continue to constrain IIFL Finance's near-term performance, global rating agency Fitch said.

This could pose downside risks to its ratings when combined with reduced liquidity coverage of near-term debt maturities, Fitch Ratings said in a statement..

IIFL Finance's performance report for the first nine months of FY25 illustrates the asset quality and earnings headwinds facing the company and others in India's non-bank financing sector, it said.

Last year in March, the Reserve Bank of India (RBI) had imposed ban on its gold loan business. After six months, RBI lifted the restrictions.

Return on assets (before non-controlling interest) improved to a Fitch-estimated 0.6 per cent (annualised) in 3QFY25, as the company rebuilt its gold-backed loan portfolio after the RBI lifted its regulatory ban on the business line in October 2024..

Unsecured personal loans comprised only 0.7 per cent of gross loans, but exhibited significant stress with a 10.1 per cent Non Performing Loan ratio, it said, adding, secured MSME loans accounted for another 11 per cent of gross loans and also showed rising delinquencies, although at a slower pace.

Persistent low liquidity buffers of less than three months of upcoming debt maturities are a key negative sensitivity for IIFL Finance's rating, it said.

Prolonged underperformance on this metric would place downward pressure on the rating, particularly if asset quality and earnings come under further strain, it added.