NBFC collections steady for securitized pools across asset classes remain - ICRA
The average collection efficiency in ICRA-rated securitized retail pools originated by Non-Banking Finance Companies (NBFC)s and Housing Finance Companies (HFC) s improved significantly during Q2 FY2022 on the back of continued decline in fresh Covid-19 infections during June to October 2021 period, a high share of vaccinated population and uninterrupted operational activities of these entities. Collection efficiency (including overdue collection) for the most affected asset classes, viz microfinance and SME loans, reached close to 100% for September 2021 from a low of 80% seen in May 2021. Collections in the housing loan segment continued to remain healthy during Q2 FY2022, post swiftly recovering to presecond wave level in June 2021.
Further, the collections in commercial vehicle (CV) loans have also improved to more than 100% by September 2021 driven by higher inter/intra-state movements upon revival of businesses/ mining/factory production activities driving movement of raw materials/final products backed by increased consumer demand owing to various festivals in Q2 FY2022.
Says Abhishek Dafria, Vice President and Head - Structured Finance Ratings at ICRA: “With the operations of lenders achieving close to normalcy levels in Q2 FY2022, the monthly collection efficiencies recovered to pre-second wave levels across the asset classes as observed in ICRA-rated securitized pools. While the possibility of another wave of fresh Covid infections remains, the likelihood is reducing as the proportion of vaccinated population has been on a steady rise. We thus expect collections to remain healthy for the near term. The 90+ delinquencies have seen a decline as of September 2021 compared to the peak seen in May 2021, but remain much higher than the pre-Covid levels for most asset classes. Majority of the lenders have reported lower bounce rates in their portfolio led by the improvement in collections on the back of uninterrupted operational a c t i v i t i e s . Wit h stable business environment expected to continue, we expect stable credit performance of ICRA-rated securitization pools.”
I CRA has a l s o o b s e r v e d t hat with the resumption of normalcy in business and operational activities, the collections performance of retail pools securitized post the first wave (i.e. September 2020), especially for the more affected unsecured lending sector (i.e. unsecured SME and microfinance loans) remained robust and better than the pools originated prior to the same. This is on account of tightening of pool selection criteria by the investors and strengthening of better-quality loans in the prevailing credit appraisal processes and parameters by the lenders to ensure addition of better-quality loans in the portfolio.