Collection efficiency is now close to 100% in September: ICRA

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Collection efficiency of finance institutions reached close to 100% in September this year, says a report. The improvement is from a low of 80 per cent registered in May 2021.

Housing loan collections remained strong, while the same from commercial vehicle (CV) loans increased to 100% by September 2021, owing to increased inter/intra-state movements following the resuscitation of enterprises.

Monthly collection efficiency for securitised retail pools has significantly gone up during Q2 of FY22, the Business Standard reported quoting rating agency ICRA. This was due to the drop in Covid-19 cases, a large proportion of the vaccinated population, and the continuous operation of financial and housing financing companies.

The report quoted Abhishek Dafria, Vice President and Head Structured Finance Ratings, ICRA, as saying that with lender operations coming back to near-normalcy levels in the September quarter, the monthly collection efficiency across asset classes rebounded to pre-second wave levels.

Loans

The 90-day plus delinquencies also decreased as of September 2021 compared to the peak reached in May 2021, but remain much higher than pre-Covid levels for the majority of asset classes.

Another sign that asset quality was improving was that the majority of lenders reported decreased bounce rates in their portfolio, owing to improved collections as a result of continued operational activities.

With the return to normalcy in business and operational activities, ICRA has found that the collections performance of retail pools securitized after the first wave, particularly in the more affected unsecured lending sector, has remained robust and superior to pools originated prior to the first wave.

This is due to investors tightening pool selection criteria and lenders strengthening better-quality loans in existing credit appraisal processes and specifications to ensure better-quality loans are added to the portfolio.