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Small fintech-led non-bank financial companies (NBFCs) could be in for greater trouble in the current fiscal due to business disruptions from the national lockdown, according to a new report by India Ratings and Research.

“FY21 could prove to be the year of reckoning for small NBFCs because of the ongoing business disruptions caused by the Covid-19 pandemic. This is especially for the new-age NBFCs that use technology substantially across the loan management cycle – financial technology NBFCs,” it said in a statement on Monday.

It said these NBFCs could be more disproportionately impacted than any other financial institution, given their borrower profile, which is largely micro, small and medium size enterprises and largely unsecured lending.

“In few cases, borrowers may also have leverage from traditional lenders, and fintech NBFCs may have plugged the additional short term borrowing needs,” it said.

While such NBFCs rated by the agency do not have immediate liquidity challenges, they are likely to face elevated asset quality issues if MSME mortality intensifies due to an extension in the lockdown and there is slow recovery of dues.