S&P said commercial vehicle (CV) domestic sales contracted 20 per cent in the quarter ended September, compared to the same period a year ago.
The repayments by borrowers showed pick-up after the six-month moratorium ended in August, pushing the collection efficiency to 95 per cent. This trend may not sustain, says rating agency Standard and Poor’s (S&P), given the diminishing savings that could potentially hurt collections.
According to the National Automated Clearing House (NACH) data, of the 84.83-million debit requests in October, a little over 40 per cent were declined. In September, around 40.83 per cent of debit requests were declined, as was the case in August, with 40.3 per cent requests declined. However, in July, the declined request was higher at almost 42 per cent, while in June, it peaked at 45.36 per cent. April and May witnessed a bounce rate of 36-38 per cent.
The unsuccessful auto-debit requests through the NACH platform is generally referred to as bounce rates. The NACH debit platform is largely used for the collection of payments pertaining to loans, investments in mutual funds, and insurance premiums. But the transactions mostly take place for loan repayments.
The NACH data is leaving bankers worried. At the system level, there may be a small dip in the collection efficiency. Directionally, it may not be as robust as what was seen in the second quarter. Most of the collection efficiency is on a quarterly basis. Some people who did not pay in October may pay both instalments in November, said a State Bank of India executive.
Echoing his misgivings, a chief executive of mid-sized private bank said the economy has contracted in the first and second quarter substantially. It is natural that payments will be impacted and collection efficiency will show a dip in the months ahead.
S&P said commercial vehicle (CV) domestic sales contracted 20 per cent in the quarter ended September, compared to the same period a year ago. Accordingly, collections for CV lenders like Cholamandalam Investment and Finance Company are relatively lower, with a collection efficiency for September at 87 per cent.
Anil Gupta, vice-president and sector head-financial sector ratings, ICRA, said the uptrend could be attributed to pent-up demand or a seasonal one.
“We may get a clearer picture when the impact of pent-up demand reduces. Delinquencies would have gone up,” added Gupta.