The report says that retail loan payments will plummet in April.

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Wambai : Payments on retail loans “fell sharply”, microloans – up to 20%

The report said Monday that there was a “sharp decline” in collection efficiency in pools of retail assets across asset classes in May due to the second wave of the pandemic, when microlenders saw a drop of up to 20%.

“ICRA recorded a sharp decline in proceeds from rated securitization transactions in April 2021 (ie payments in May 2021) following an increase in the number of Covid-19 cases and the imposition of locks / restrictions on movement, which affected the transactions and fees of NBFCs and HFCs “, – says the report of the domestic rating agency ICRA.

Much of the country was subject to localized lockdowns until the end of May in the second wave, when the number of new cases exceeded 4.14 million and resulted in more than 4,500 deaths daily at its peak.

The ratings agency said it expects the situation to improve from June, when the unblocking measures will lead to a resumption of the economy and the start of activity.

It says microfinance institutions saw the highest decline in collection efficiency, indicating that advance payments and late collection were 20% lower in April compared to March.

The agency added that fees for SME loan pools and commercial vehicle loan pools have also dropped significantly from the highs reached in March 2021.

Home and real estate loans remained the least affected and most resilient as seen in the last fiscal year, given the borrower’s relationship to underlying collateral and the priority given to borrowers in repaying such loans, the report said.

Its head of structured finance ratings, Abhishesk Dafriya, said: “In May 2021, fees would fall even further, especially for microfinance pools where companies have a high share of collected funds.”

Accordingly, delinquencies on retail loan pools, which were gradually decreasing in Q4 of fiscal 21, are now expected to rise again, he added.

Securitization volumes are expected to remain weak in the first quarter of 2021-22 due to disruptions caused by the second wave of the pandemic and renewed investor alertness about asset quality and future cash flows, the agency said.

“We expect securitization volumes in fiscal 2022 to be higher than in the previous fiscal year, with most securitizations occurring in the second half of the fiscal year,” said Mukund Upadhyay, head of the structured finance ratings sector.

He added that reducing COVID-19 cases and increasing government focus on vaccinating the general population over the next six months will help improve economic / business activity and support overall securitization in the future.

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