Rated auto, small business portfolios showing higher delinquencies: Moody’s

By: |
December 10, 2020 7:39 PM

This indicates some borrowers are not able to resume or sustain repayments amid the deep economic contraction, the global ratings agency said.

The government announced a Rs 2.7 lakh crore fiscal support package, which will benefit borrowers in the MSME sector. (Photo source: IE)

Moody’s Investors Service on Thursday said asset-backed securities (ABS) on auto and small business loans rated by it have shown an increase in delinquencies since the end of the moratorium.

This indicates some borrowers are not able to resume or sustain repayments amid the deep economic contraction, the global ratings agency said.

“…delinquency rates for rated auto and micro, small and mid-size enterprise (MSME) loan ABS also increased,” the agency said, adding that performance risks for the ABS will remain elevated for the next year on weak economic performance.

Loan repayments have improved markedly in September and October, after the end of the moratorium in August but are still trending below the pre-coronavirus levels, its analyst Dipanshu Rustagi said.

“Given weak economic conditions, asset performance risks will remain elevated in this environment and we expect delinquencies in auto loan ABS and MSME loan ABS will continue to increase over the next 6 to 12 months,” he added.

However, a new government support measure and existing transaction features will mitigate some of the risks, the agency said.

In November, the government announced a Rs 2.7 lakh crore fiscal support package, which will benefit borrowers in the MSME sector, it said.

The Indian ABS rated by it will also benefit from non-amortising cash reserves and excess spread, which provide liquidity and buffers against losses, it added.

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