Crisil noted the delinquencies in CV loans are increasing, with monthly collection ratio (MCR) of the CV pools it has rated, dropping below 95% for the first time since 2009. The performance of heavy CV loans is the weakest, because of a sluggish economy, industry overcapacity and increasing input costs.
The median MCR of Crisil-rated securitised non-mortgage retail pools declined to 94.4% for the quarter-ended December 31, 2012, from 96.2% for the corresponding quarter of the previous year.
Crisil has ratings outstanding on 80 securitised CV pools, aggregating R17,700 crore in rated amount. These pools primarily contain vehicle assets, including loans provided for purchase of heavy and light CVs. These loans have been originated and securitised by eight leading NBFCs.
The 90+ dayspast-due levels, an indicator of loans not repaid for more than 90 days, has increased by about 100 basis points over the three quarters-ended December 2012. The sub-par collection levels may continue over the next few quarters, reflecting adverse impact of reduced freight demand on CV owners and their inability to pass on increases in fuel and labour costs.
This has substantially eroded earnings and debt-servicing capability of transport operators. The delinquencies are, therefore, likely to gradually deepen and move beyond 180 days, leading to a potential rise in NPA levels, Crisil noted in its report.
However, the credit protection available to investors in Crisil-rated CV pools continues to remain healthy as the impact of lower collections is offset by structural credit enhancement in these pools, enabling them to withstand the pressure of increasing shortfalls.
Crisil analysts said the healthy level of available credit enhancement for these pools ensures investors in the rated instruments will continue to be serviced in full and on a timely basis, even if collection ratios decline substantially in the future.
Despite this weakness in CV pools, the performance of other retail asset classes, such as housing loans, car loans and microfinance loans, remains stable, Crisil said.