EMI bounces ease in December, shows NACH data

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January 20, 2021 2:15 AM

The NACH data showed that of the 84.04 million debit requests for Rs 81,576 crore worth of payments made in December, 32 million requests for Rs 23,809 crore were declined.

Bankers have been insisting that the high bounce rates are due in large part to defaults at fintech lenders, whose collections are still below pre-Covid levels.Bankers have been insisting that the high bounce rates are due in large part to defaults at fintech lenders, whose collections are still below pre-Covid levels.

The failure rates of auto-debit transactions on the National Automated Clearing House (NACH) platform, many of which are EMI requests, eased in December, showed data released by the National Payments Corporation of India (NPCI).

The share of unsuccessful auto-debit requests in volume terms stood at 38.09% in December, as against 40.5% in November. In value terms, the bounce rate in December eased to 29.18% from 31.13% in the previous month. Bankers have been insisting that the high bounce rates are due in large part to defaults at fintech lenders, whose collections are still below pre-Covid levels.

The NACH data showed that of the 84.04 million debit requests for Rs 81,576 crore worth of payments made in December, 32 million requests for Rs 23,809 crore were declined. Bounce rate of anything above 25% is a cause for concern as it shows retail delinquencies remain well above pre-Covid levels.

Analysts said that while bounce rates in value terms have improved over the last few months, in terms of volumes they are persistently high. Anil Gupta, sector head – financial sector ratings, Icra, said, “This shows that smaller ticket-size borrowers are finding it harder to make repayments, as compared to larger ticket borrowers. This trend has been continuing ever since the moratorium was lifted.”

At the same time, asset quality is being closely watched as slippages could soar once the Supreme Court bar against recognition of post-August 31 bad loans is lifted. In a recent report, Emkay Global Financial Services wrote that proforma slippages are likely to be optically elevated in Q3 due to the spillover from Q2 and the elapsing of the 90-day period after the end of the moratorium. “…but our discussions suggest that overall NPA (non performing asset) formation as well as restructuring proposals are meaningfully lower than expected though one needs to be watchful of the tail-end risk,” the broking firm said.

Stress remains elevated in products such as commercial vehicle (CV) loans, credit cards and microfinance loans. Stress on non-bank lenders’ books could also perk up in the December quarter as the quantum of restructuring by them has been limited, Emkay said.

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