Assets under management (AUM)

Assets under management (AUM)

Subject: Economy

Context: A report highlighted that the assets of non-banking financial companies (NBFCs) are likely to touch ₹1.5-1.8 lakh crore, or 6-7.5% of their assets under management (AUM) by the end of this fiscal.

Concept:

• Asset quality of NBFCs is expected to deteriorate further due to disruption of business operations caused by the pandemic, especially in the industry sector, a major recipient of NBFC credit. This came on the back of already stressed NBFCs on the back of IL&FS crisis and DHFL crisis.
• Challenge currently is more severe as unlike specific segment in crisis earlier, pandemic impacted all segments.
• Home loans with 35-40% share in Assets under Management (AUM) of NBFCs (others are: Vehicle finance, Real estate, MSMEs finance) accounts for largest share.
• the one-time COVID-19 restructuring window, and the micro, small and medium enterprises’ (MSME) restructuring scheme of the Reserve Bank of India (RBI) will limit the reported gross non-performing assets (GNPA)

Assets under management (AUM)

• It measures the total market value of all the financial assets which a financial institution manages on behalf of its clients and themselves.
• AUM is an indicator of the size and success of a given fund house.