Collection efficiency of NBFCs' securitised pools improves in Q2 FY22: Report

Domestic rating agency Icra Ratings on Wednesday said the collection efficiency in its rated securitised retail pools originated by non-banking finance companies (NBFCs) and housing finance companies (HFCs) has witnessed an improvement in the second quarter of fiscal 2022.

The improvement was on account of the continued decline in fresh COVID-19 infections during June to October 2021 period, a high share of the vaccinated population and uninterrupted operational activities of these entities, the agency said in a report.

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"With the operations of lenders achieving close to normalcy levels in Q2 FY2022, the monthly collection efficiencies recovered to pre-second wave levels across the asset classes as observed in ICRA-rated securitised pools,? the agency's Vice President and Head - Structured Finance Ratings Abhishek Dafria said.

Securitisation involves transactions where credit risks in assets are redistributed by repackaging them into tradable securities with different risk profiles. It may give investors of various classes an access to exposures which they otherwise might be unable to access directly.

The agency said that the collection efficiency (including overdue collection) for the most affected asset classes, viz microfinance and SME (Small and medium-sized enterprises) loans, reached close to 100 per cent for September 2021 from a low of 80 per cent seen in May 2021.

Collections in the housing loan segment continued to remain healthy during Q2 FY2022, post swiftly recovering to pre-second wave level in June 2021, it said.

Further, the collections in commercial vehicle (CV) loans have also improved to more than 100 per cent by September 2021 driven by higher inter/intra-state movements upon revival of businesses/mining/factory production activities driving movement of raw materials/final products backed by increased consumer demand owing to various festivals in July-September period.

Dafria said he expects collections to remain healthy for the near term.

The 90+ delinquencies have seen a decline as of September 2021 compared to the peak seen in May 2021, but remain much higher than the pre-Covid levels for most asset classes, he said.

Majority of the lenders have reported lower bounce rates in their portfolio led by the improvement in collections on the back of uninterrupted operational activities, Dafria said.

"With stable business environment expected to continue, we expect stable credit performance of Icra-rated securitisation pools,? he added.