The rating agency said in a note that collection efficiencies, including overdue collections for the most affected asset classes, i.e. microfinance and SME loans, approached 100% for September 2021 from a low of 80% seen in May 2021.
Collections in the housing loan segment remained healthy, while commercial vehicle (CV) loans also improved by over 100% as of September 2021, driven by higher inter-state movements on the revival of businesses.
ICRA Vice President and Head Structured Finance Ratings Abhishek Dufria said, “Monthly collection capacity reached pre-second wave levels, with lenders approaching normal levels of operations in the September quarter.”
“While the possibility of another wave of fresh COVID infections remains, the chances are slimming as the proportion of the vaccinated population continues to grow. Thus we expect the collection to be healthy for the near term. ,
Delays of more than 90 days as compared to the peak seen in May 2021 also marked a decline to September 2021, but much higher than pre-Covid levels for most asset classes. Another sign that asset quality was improving is that most lenders reported lower bounce rates in their portfolios, driven by improved collections on the back of uninterrupted operating activities.
“With the stable business environment expected to continue, we expect stable credit performance from the ICRA-rated securitization pool,” Dufria said.
ICRA has also observed that with the resumption of normalcy in business and operating activities, the collection performance of the securitized retail pools after the first wave, particularly strengthened for the more affected unsecured lending sector and the pool generated before the same. was better in comparison.
This is due to tightening of pool selection criteria by investors and consolidation of better quality loans in the credit appraisal procedures and standards practiced by lenders to include better quality loans in the portfolio.