Bounce rates for auto debit transactions dropped to pre-Covid levels in October indicating easing of stress amongst borrowers with the opening up of the economy.

The bounce rate, or the percentage of unsuccessful auto debit transactions, in October was 31.2 per cent, according to data with the National Payments Corporation of India from the National Automated Clearing House (NACH).

This is the lowest level since January and February 2020 when the bounce rate was at 31.04 per cent and 31.46 per cent respectively. Overall, of the 8.65 crore auto debit transactions presented on the NACH platform in October, 5.95 crore, or 68.8 per cent, were successful while 31.2 per cent were returned.

The bounce rate for auto debit transactions has been gradually coming down since July after it peaked to 36.5 per cent in June during the second wave of the Covid pandemic and State-level lockdowns that hampered economic activity.

Improved collection

Significantly, the volume of auto debit transactions has also increased — from just 7.77 crore in January 2020, then declining to 6.4 crore in May 2020. Most banks and NBFCs have reported improved collection efficiency, at pre-Covid level for many, in the second quarter results.

Earlier this month, Mahindra Finance reported that in October, its collection efficiency was at about 91 per cent. While this was lower compared to the second quarter of the fiscal, it is better than the October 2020 collection efficiency of 89 per cent, it had said.

Similarly, CreditAccess Grameen, among the largest microfinance institutions of India, said collection efficiency excluding arrears improved to 93.3 per cent in the second quarter of the fiscal and further to 94.3 per cent in October.

“Market feedback and collection efficiency reported by a few lenders suggest normalisation kicking in with improvement in collection efficiency from mid-June once there was easing of restrictions and lockdowns,” said a report by ICICI Securities early last month.

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