Ratings agency ICRA said delinquencies relating to loans for new MHCVs could continue to remain high during H1FY21 before any meaningful reversal in the trend.
With borrowers unable to reach branches and no one able to reach them, collections are likely to come to a halt, Ramesh Iyer, VC and MD, Mahindra & Mahindra Financial Services (MMFS), indicated on Wednesday. Iyer pointed out that if customers aren’t paying, for whatever reason, it is in effect, a forced moratorium. “If the Reserve Bank approves of a moratorium we could apply it to all customers to see if repayments can be rescheduled,” he said.
While digital payments have been enabled, some owners of commercial vehicles have been hit by cash flow problems, a fallout of the disruption caused by the coronavirus pandemic, lenders indicated. “Repayments have been drying up over the last three-four days,” a senior executive with a mid-sized bank with a sizeable presence in CV lending confirmed to FE. “It is more of a problem for NBFCs, but even for us, customers who rely on cash have been hit badly,” he said.
The defaults are few as of now though they could go up if the coronavirus pandemic causes a prolonged disruption. Umesh Revankar, MD and CEO, Shriram Transport, said repayments could be re-scheduled for good borrowers. “We have not been penalising customers and will accommodate them for a one- to two-month delay. If the crisis lasts longer, we will need to see what the regulators say,” Revankar added. He observed that collections in March have been reasonably good though there has been some delay.
While NBFC have asked the Reserve Bank of India (RBI) to allow their borrowers a three-month breather on EMI repayments, a forced moratorium is already playing out in the system, industry executives said. Analysts at Kotak Institutional Equities wrote Wednesday recoveries in Q4FY20 may be low as the recovery mechanism has practically ground to a halt, especially during the past 10 days of the month – a period crucial to collections. As state governments and local authorities enforce lockdown across the country and the movement of fleet operators’ vehicles get severely restricted, the operations of their financiers have begun to get affected.
Ratings agency ICRA said delinquencies relating to loans for new MHCVs could continue to remain high during H1FY21 before any meaningful reversal in the trend. “The share of loans 90+ days past due (dpd) and 180+ dpd has nearly doubled to 6% and 3% respectively as on December 31, 2019. While the NBFCs focus strongly on improvement in collections in the final quarter of the financial year typically, it may not be so this year with all routine business activities likely to be severely impacted due to the spread of coronavirus,” the agency noted.