Singapore, Nov 23 (IANS): Although loan collections improved at the rated Indian non-bank finance companies (NBFCs) - Indiabulls Housing Finance Ltd and IIFL Finance Limited - loan delinquencies will inevitably increase, pressuring asset quality, Moody's Investors Service has said in a new report on Indian NBFCs.

"Various types of support measures for borrowers meant that Indiabulls and IFFL Finance's asset quality remained stable in the first half of the fiscal year ending March 2021 (fiscal 2021)," said Alka Anbarasu, a Moody's Vice President and Senior Credit Officer.

"But delinquencies will eventually increase once all the support programmes end, given the severity of the pandemic's impact on India's economy."

Indiabulls and IIFL Finance's profitability will continue to weaken as they increase credit costs to provision for potential bad loans. But modest growth in loans and loan assignments - i.e. loan sales to banks - will help them maintain their capitalisation.

Meanwhile, Muthoot Finance Ltd has reported improvements in asset quality and profitability as a surge in gold prices aided loan recoveries and disbursements. Its robust profitability will ensure that its capitalisation remains strong, the report said.

Despite weakening asset quality, funding will remain stable at all the NBFCs as public sector banks continue to purchase loans to fulfill their own quotas for lending to priority sectors, easing liquidity stress for NBFCs, Moody's said.