India Ratings, second covid wave, Borrowers, microfinance loan, rural loan collections

The second covid wave is expected to significantly affect May 2021 loan pool collections as borrowers continue to face stretched liquidity and lenders see collection disruptions, rating agency India Ratings said on Tuesday. The agency believes the second wave and its demand disruption will continue to impact borrowers at the bottom of the pyramid and loan sale transactions could see higher delinquencies from rural geographies.

The agency said it has already witnessed a drop in April 2021 collections in the rated securitisation transactions across asset classes. Across all rated transactions, the current collections reduced to 73% in April 2021 from 84% in March 2021.

“Even as non-banks ramped up digital infrastructure, collections could be impacted significantly in May 2021 primarily because lenders were forced to stop door-to-door collections after agents, staff and borrowers had fallen ill,” the rating agency noted. “In a situation where the safety of the employees is paramount, lenders are cautious regarding their staff stepping out for collections and follow-ups.”

India Ratings, second covid wave, Borrowers, microfinance loan, rural loan collections

The agency also expects an additional layer of delinquency build-up in the securitisation pools over and above the delinquency currently witnessed. Vulnerable borrowers (both individuals and businesses) would have already slipped into delinquency during the first shock in FY21 and incremental delinquencies in FY22 are expected from non-urban geographies and borrowers with fragile financial cushions.

Disruptions in face-to-face collections have also significantly impacted microfinance loan performance. A number of microfinance borrowers who were paying only one month’s due in January to March, have been significantly impacted leading to much lower current collections in that segment.

Though, the rating agency believes that the subsequent pandemic waves could be smaller than from the first as economic agents learn to ‘operate within a pandemic’. Although the nature of the shock in the second wave is different from the first one, India Ratings believes the impact of capital obsolescence that started off in FY21, due to structural changes in consumption patterns and investment priorities, will continue in FY22.

“Thus while most businesses recovered, there are pockets of stress in each asset class, as characterised by the nature of business, such as contact-intensive discretionary services which may not recover until sizeable population is vaccinated,” the agency noted. “The comeback of demand levels in FY22 post the second wave may not be to the levels witnessed in FY21, due to the lower consumer sentiment as a fall out of the widespread health crisis.”

The second wave is more dispersed and thus smaller towns and villages witnessed a sharp rise in infections and fatality. This is likely to affect the rural non-agri demand sentiment and rural employment levels in addition denting urban demand. With reduced income levels and higher health expenditures, India Ratings expects the performance of asset segments such as microfinance to be significantly affected.

“Asset segments dependent on agriculture such as tractor/farm equipment loans are expected to be affected to a lower extent as they cater to the non-discretionary demand,” it said. “The pandemic shocks continue to adversely impact the low-middle-income individuals and small businesses, whose loans are typically securitised in India. The pandemic has also accelerated the formalisation of the economy where bigger/organised businesses are gaining market share from smaller businesses.”


Japan travel news, japan travel guides, japan holiday destinations and japan reviews

LATEST NEWS

NEWS RELATED

Government plans to dress up PSBs before sale; Bank of Maharashtra, BOI, IOB in queue

The government plans to dress up state run lenders’ balance sheets through capital support and sale of non-core assets among other measures before putting them on the block. The transformation plan also includes transfer of impaired loans to the proposed bad bank and reducing employee count by offering attractive voluntary…

Read more: Government plans to dress up PSBs before sale; Bank of Maharashtra, BOI, IOB in queue

Yes Bank to shift base to former Reliance Infra headquarters in Mumbai

Private lender Yes Bank will give up its entire leased space in Indiabulls Finance Centre in central Mumbai and occupy the erstwhile Anil Dhirubhai Ambani Group headquarters at Santacruz as early as next week, bringing down its operational and rental costs substantially. “It will be a lock-stock-barrel move out of…

Read more: Yes Bank to shift base to former Reliance Infra headquarters in Mumbai

Paytm unit seeks RBI exemption from NBFC tag

Paytm Entertainment — a subsidiary of fintech giant Paytm – faces the risk of being classified as a Non-Banking Financial Company (NBFC) after it lent money to a joint venture business that exceeded the central bank’s limits. The online ticket booking services provider has approached the Reserve Bank of India,…

Read more: Paytm unit seeks RBI exemption from NBFC tag

Large market, ready infra make India top destination for digital banks:BCG

India leads the digital banking opportunity among its South East Asian peers with a potential revenue generation of 6 to 10 times that of the other markets due to its large market, ready digital payment infrastructure and farsighted regulation, a report by consultancy firm BCG has said. In India, the…

Read more: Large market, ready infra make India top destination for digital banks:BCG

India offers huge potential for digital banks: Report

India offers a huge potential for Digital Challenger Banks (DCBs) but currency depreciation and local regulations are concerns for foreign investors, according to a report. Leading consultancy BCG said in the report on Wednesday that the revenue opportunity in India, which has a population of 130 crore people, was pegged…

Read more: India offers huge potential for digital banks: Report

CBI carries out searches in Yes Bank case

The CBI has carried out searches at multiple locations in Delhi and NCR after registering an FIR against Gautam Thapar, Avantha Realty and others for alleged diversion of over Rs 466 crore in Yes Bank during 2017-19, officials said. Thapar is already being probed in another case related to diversion…

Read more: CBI carries out searches in Yes Bank case

SBI Union and others ask RBI not to permit payment platform by corporates

An employee union of the country’s largest lender SBI in association with a global alliance on Tuesday asked the Reserve Bank not to allow large corporates to set up payment networks as it could lead to compromise on data safety. A coalition of labour unions and NGOs led by UNI…

Read more: SBI Union and others ask RBI not to permit payment platform by corporates

RBI nod for Ghosh's re-appointment as Bandhan Bank MD and CEO for three years

Bandhan Bank has received RBI nod to re-appoint Chandra Shekhar Ghosh as its MD and CEO for three years, lower than the five-year tenure approved by the company’s board in November last year. “The Reserve Bank of India vide its communicated dated June 8, 2021, has granted approval for re-appointment…

Read more: RBI nod for Ghosh's re-appointment as Bandhan Bank MD and CEO for three years

SBI union, others urge RBI to drop digital payments plan

PSBs looking at privatisation may come out with attractive voluntary retirement schemes

Union Bank MD Rajkiran Rai G shares his business outlook for FY22

Corporate deleveraging could continue to slowdown bank credit: SBI

NUE licences may come only by November, say sources

Second wave of Covid to derail PSB privatisation: Fitch

UCO Bank extends Rs 127 crore relief to 2,000 borrowers under recast scheme 2.0

Banks identify NPAs worth Rs 89,000 cr to be transferred to NARCL in initial phase

OTHER NEWS