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The sharp drop in NACH (National Automated Clearing House) bounce rate not fully reflective of borrowers’ credit health, according to India Ratings and Research (Ind-Ra).
The bounce rate (declined transactions) data released by National Payments Corporation of India show a continuous improvement in the collections since July 2021, the rating agency said.
In volume terms, the bounce rate declined to 30 per cent in December 2021 against 38.1 per cent in December 2020.
In value terms, the bounce rate declined to 24.4 per cent in December 2021 against 29.2 per cent in December 2020.
Ind-Ra opines that segments such as personal loans, business loans, school bus, taxi segment and heavy commercial vehicles are still witnessing lower collection efficiencies -- higher bounce rates.
“These have been restructured at a higher proportion and so the actual pain in these segments does not get reflected in the bounce rate data.,” said Pankaj Naik, Associate Director, Ind-Ra.
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Sector expects disbursements to pick up momentum by fourth quarter of this fiscalInd-Ra believes that credit cost would be elevated for FY22 and slippages from the restructured book can put pressure on the headline asset quality numbers.
Restructured book
Per the agency’s assessment, typically, the restructured book is provided in the range of 10-20 per cent. However, slippages from this book will necessitate 15-30 per cent of additional provisioning.
Thus, the NBFC space will see moderate profitability for FY22, due to higher credit costs and higher operating expenses to meet increased business volumes and the higher efforts being made towards collections.
Naik noted that while the economic normalisation and improving cash flow have helped the decline in the bounce rate, it has also benefited from the dispensation/ support received by some portion of non-banks’ borrowers in form of restructuring and Emergency Credit Line Guarantee Scheme (ECLGS) benefits.
The top 11 non-banking finance companies’ (NBFCs) restructured portfolio stood at around 3 per cent of the total asset under management (till September 30, 2021) and additional 5 per cent of the portfolio is likely to have benefited from ECLGS.
ECLGS funds helped borrowers tide over the problem caused by the drying up of liquidity.
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