Bombay : Bounce rates or defaults on equivalent monthly payments have not deteriorated so far in January as most borrowers are paying their dues on time, banks and nonbank lenders said.
The trend indicates that borrower incomes have been isolated so far from the third wave of the pandemic, unlike what was seen in the first two. Lenders, however, believe the full effect of this wave has yet to occur.
Bankers said they had yet to see a major drop in collection efficiency and hoped the third wave would ebb sooner than expected. The bounce rate takes into account recurring payments where borrowers have monthly direct debit mandates with their banks.
Two lenders – HDFC Bank and Bajaj Finance – recently reported their December quarter results, and their managements reported flat January rebound rates. Bajaj Finance told analysts that January bounce rates across all products were in line with December 2021 levels, according to a report by Motilal Oswal.
“Management raised its FY22 credit cost forecast to ₹4,800 to 5,000 crore (from ₹4,300 to 4,400 crores earlier). This is a rather conservative stance to build a management overlay and could see provision reversals if there is no impact from the third wave of covid,” Motilal Oswal said in a note on Wednesday. , adding that times are still uncertain.
Srinivasan Vaidyanathan, chief financial officer of HDFC Bank, told analysts on January 15 that the check bounce rate continued to improve in December for most retail products and not only returned to before the pandemic, but slightly better. “Furthermore, the early January bounce rate shows continued improvement,” Vaidyanathan said.
Rebound rates peaked in June 2020 after the first wave shock led to disruptions in revenue generation amid widespread mobility restrictions. It increased again in May and June 2021, after the second wave took its toll. But rates have since declined, according to data from the National Automated Clearing House (NACH).
Nevertheless, experts are not too sure that this trend will continue, believing that some segments remain vulnerable despite political support.
India Ratings estimates that segments such as personal loans, business loans, school buses, taxis and heavy duty vehicles are still experiencing lower collection efficiency or higher bounce rates. “These have been restructured to a higher proportion, and so the real pain in these segments is not reflected in the bounce rate data. India Ratings thinks the cost of credit would be high for FY22 and that restructured portfolio slippages can put pressure on asset quality numbers,” he said in a report on Wednesday.
According to Pankaj Naik, Associate Director at Indian Ratings, almost all lenders have reported improved collection efficiency.
“However, the methodology for reporting collection efficiency between lenders remains inconsistent with differences in how late collections and late demand are used for calculations. Differences on this account could be as high as 10% among the NBFCs,” he said.
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