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Slowing industrial activity forced many truckers to renege on loan payments in 2012-13, sharply raising the default rate to 3.87 per cent by March 2013. Overdues, or payments due for more than 90 days, on loans given last year, rose 49 per cent compared to December 2012, according to India Ratings and Research.
After a review of securitised loans, the rating agency said delinquencies in commercial vehicle (CV) loans for all other periods remained stable or dropped below their peak levels.
The protracted slowdown meant low business volumes, along with a fall in freight rates, which fell 2.6 per cent in the year ended March. An 18 per cent rise in fuel (diesel) prices added to the woes of truckers. For those in the heavy and medium commercial vehicle segment, the pressure was greater.
In the quarter ended March, eight of the 13 CV loan ABS (asset-backed securities) transactions of the 2012 vintage saw an average jump of 150 basis points (quarter-on-quarter) in 90+dpd (days past due) delinquencies.
The dwindling freight demand is preventing transporters from demanding higher freight rates. The increasing prices of fuel further hit the margins of transporters and their debt servicing ability. However, seven CV loan ABS deals were upgraded in the quarter ended March. These upgrades were primarily driven by an increase in loss coverage multiples, arising out of the stable asset performance and liquidation of loans extended before 2012.
The securitised paper, backed by construction equipment loans, tractor loans and mortgage loans, continued to exhibit a stable performance. Tractor loans of the 2012 vintage fared better than earlier vintages. Instances of loans overdue for more than 180 days declined. At the end of the quarter ended March, delinquencies dropped to 1.42 per cent from 1.7 per cent at the end of the quarter ended December.
Housing loans saw an improvement in asset quality. The Residential Mortgage Index (RMI) dropped to 0.33 in the quarter ended March from 0.43 in the quarter ended December. RMI tracks 90+dpd delinquencies as a percentage of initial principal outstanding for residential mortgage-backed securities of more than a year.
According to Icra, another rating agency, asset quality indicators of retail-focused non-banking financial companies (NBFCs), after seeing an improvement in the 2009-2012 period, started deteriorating in 2012-13, due to the weak operating environment.
Gross non-performing assets rose from 1.6 per cent in March 2012 to 2.2 per cent in December 2012. For NBFCs, delinquencies of more than 90 days deteriorated sharply during this period.
The segments hit hardest include gold loans, commercial vehicles, construction equipment and loans against property.
CAUGHT IN THE LOOP
- Overdues, or payments due for more than 90 days, for loans given last year, rose 49 per cent compared to December 2012
- After a review of securitised loans, India Ratings and Research said delinquencies in commercial vehicle loans for all other periods remained stable or dropped below their peak levels
- The protracted slowdown meant low business volumes, along with a fall in freight rates
- The pressure was greater for those in the heavy and medium commercial vehicle segment
- The dwindling freight demand is preventing transporters from demanding higher freight rates
