The share of failed auto-debit requests on the National Automated Clearing House (NACH) platform eased to a 38-month low of 22% in terms of value in May 2022, down 50 basis points (bps) from the previous month. In volume terms, the bounce rate stood at a 33-month low of 29%, down 90 bps from April.
According to data released by the National Payments Corporation of India (NPCI), of the 101.8 million debit requests made in May over the NACH platform, 29.5 million bounced. In terms of value, of the debit requests for Rs 94,752 crore, declines were to the tune of Rs 20,812 crore.
Sector experts said that the May bounce rate by value is well below pre-Covid levels of 24-25% and near June 2019 levels. ICICI Securities said in a report on Monday that the improving bounce rate trajectory after a surprise rise in March 2022 suggests that slippages and credit cost will decrease going forward in FY23.
“Also, Q4FY22 earnings reflected that asset quality woes have waned for financiers and the focus is shifting back to growth,” the report said.
In the backdrop of strong inflationary pressures, rising input costs and interest rate hikes by banks, analysts will now closely watch the extent of deterioration in lenders’ asset quality. A majority of home loans extended by banks have been repriced upwards twice in as many months with the Reserve Bank of India (RBI) hiking the repo rate, to which these loans are linked.
Data from the NACH platform does not include intra-bank transactions and hence does not represent all debit requests made in the financial system. EMI payments to smaller non-banking financial companies (NBFCs) and fintechs account for a large share of debit requests made through the NACH platform.
NBFCs and housing finance companies (HFCs) saw an improvement in asset quality in Q4FY22 amid lower slippages from the restructured book, analysts at rating agency Icra said on Monday. Companies augmented their collections in view of the tighter asset classification norms which are set to apply to them from October 2022.
AM Karthik, vice-president, financial sector ratings, Icra, said that the standard restructured book of NBFCs is estimated to have reduced to 2.7-3% in March 2022 from the peak of 4.5% in September 2021, and for HFCs it moderated to 1.4-1.6% from 2.2%. “The performance of this book would remain a monitorable, considering the weakening macroeconomic/operating environment and the balloon repayment schedule of some of these loans,” Karthik said.