Auto debit bounces subsided in March but remain above pre-Covid levels
The March eased default rates of auto debit transactions on the National Automated Clearing House (NACH) platform, many of which are EMI inquiries, showed data released by the National Payments Corporation of India (NPCI). However, at a volume of 32.73%, the bounce rate remained well above pre-Covid levels, raising concerns about the quality of lenders’ assets after a preliminary judicial stay on bad loan recognition was lifted after August 31, 2020.
The proportion of unsuccessful auto debit inquiries decreased by volume from 36.65% in February. In terms of value, the bounce rate in March remained almost at the level of the previous month at 27.48%. Bankers have insisted that the high bounce rates are in large part due to failures at fintech lenders, whose collections are still below pre-Covid levels. Listed banks and non-bank lenders will be releasing their fourth quarter results starting Saturday.
Bounce rates of more than 25% remain a concern as retail arrears continue to be well above pre-Covid levels. Analysts will be keeping a close eye on lenders’ non-performing assets (NPA) numbers as these will be the first quarterly results after the Supreme Court (SC) allowed banks to resume non-performing loan recognition under income recognition and asset classification (IRAC) . Norms.
Non-bank financial firms (NBFCs) have already begun to shoulder the brunt of a resurgence in Covid-19 infections. In a report on Wednesday, rating agency Icra said that the pressure on asset quality would unfold fully in FY22 as the level of economic activity is not yet significantly above pre-Covid levels, with risks from the recent spike the infection rate can be increased. “While NBFCs may proceed with overdue clawbacks following the lifting of the Supreme Court order on NPA classification in March 2021, ICRA finds that most of the key asset / borrower target segments continue to perform sub-optimally, which affects the leading realizations would affect higher credit losses, ”the report said.
Earlier this month, Fitch Ratings announced that asset quality concerns remain as banks’ financial results have not yet fully taken into account the impact of the first wave and the strict 2020 lockdown due to the existing forbearance. “We consider loans to micro, small and medium-sized enterprises (MSMEs) and private customers to be the most vulnerable. Retail lending has performed better than expected, but could experience heightened stress if renewed restrictions continue to affect individual incomes and savings, ”said Fitch.
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