Collection efficiency in NBFC, HFC securitised pools improves in June: Icra

National rating agency Icra Ratings announced on Thursday that the monthly collection efficiency of its rated securitised retail groups, sourced from NBFC and HFC, increased 710 percent for June 2021 compared to the previous month. said in a report.

“With the gradual easing of restrictions in many states from June 2021, monthly collection efficiency increased 710% month over month across all asset classes, as seen in ICRA’s securitised portfolios,” said the agency’s vice president and director of structured finance . Reviews) Abhishek Dafria said in the report.
The agency said collections from securitised retailers after the first wave (i.e. September 2020), particularly for the hardest-hit unsecured loan sector, performed better than groups that emerged before the wave.
This was due to the tightening of existing credit assessment procedures and parameters by lenders to ensure the inclusion of high quality credit in the portfolio as well as strict credit selection criteria, he said.
Dafria said any spike in Covid infections or the appearance of the third wave would undo collections.

“So far we are seeing localised events like the opening of Maharashtra, while the new restrictions in Kerala are affecting businesses that are concentrated in these regions rather than the industry as a whole,” he said.
Despite the lack of aid measures such as the moratorium in the previous year, the impact of the second wave on economic and commercial activity in general was not severe, the agency said.

However, the rural and semi-urban areas of the country were affected more by the second wave than by the first wave, which had an impact on solvency.
As a result, the recovery in recoveries from weaker micro finance borrowers has been slower, he said.

A similar trend of lower recovery of recoveries can be seen in unsecured loans to SMEs, as broader economic and commercial activity has not yet reached normal levels.

“The solvency of these borrowers (ie micro finance and unsecured SME loans) has been hampered by higher unforeseen medical expenses with lower commercial cash flows,” the report said.

However, home loan recoveries (HL) saw the fastest recovery in June 2021 as they were the least affected in the last fiscal year.

The collection of commercial vehicle loans (VC) has also improved significantly.

Agency Vice President and Sector Head (Structured Finance Ratings), Mukund Upadhyay, said the over 90 defaults in June 2021 compared to May 2021 were down across asset classes as most lenders lower bounce rates on their portfolio reported due to improved recoveries.

Based on the stable collections and lower bounce rates reported by various originators in their portfolio for July 2021, asset quality will continue to improve in the second quarter of fiscal 2022, it said.

That improvement will come as units continue to focus and intensify their collection efforts to reduce variance given the uncertainty surrounding the third wave in a moderate vaccination campaign, he said.

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