Monthly collections from securitised retail loans up to 50% in June: Crisil

Collection ratio for loans in microfinance, commercial vehicle and mortgage space had fallen to near-zero in many pools in April 2020

The monthly collection ratio for securitised retail loans like microfinance, commercial vehicles and mortgages have risen to above 50 per cent after falling to near-zero in many pools in April 2020, according to Crisil.

The median monthly collection ratio represents all collections excluding prepayments as a percentage of estimated pre-moratorium billing for the month. Collections for pools of microfinance and commercial vehicle loan receivables, which had seen the sharpest drop after the lockdown, clawed back above 50 per cent in June.

In line with expectations, mortgage receivables, with property as collateral, were the most resilient with median collection ratio over 70 per cent, despite a dip in July, Crisil said in a statement.

Rohit Inamdar, Senior Director, Crisil Ratings, “While there is a clear improvement in collection ratios, they still remain way off pre-Covid-19 levels of over 95 per cent.

In the near term, nascent recovery could come under threat because of the flood situation in some parts of the country and imposition of localised lockdowns to contain the infection rate, Inamdar said.

Krishnan Sitaraman, Senior Director, Crisil Ratings, with the gradual restart of economic activity from June, cash flows of borrowers have been improving, enabling more of them to move out of the moratorium.

The uptick in collections has also been supported by the relative buoyancy of the rural economy. Further, proactive steps by many originators through leveraging of newer technological platforms aided overall collections, he added.

Non-banking financial companies (NBFCs), many of which were dependent on cash collected by field staff, sharpened focus on digital modes of collections.

Additionally, many NBFCs are now offering a wider array of payment channels to ensure that physical distances do not materially impede collection activities. Physical collections, wherever permissible within the restrictions, continue as a channel, albeit with reduced frequency and length of meetings and added social distancing norms, it added.

Despite collections from securitised pools being lower than in the past, ratings on pass-through certificates (PTCs) have been resilient till now due to sizeable credit enhancements in the structures, Crisil said.