During the first wave of covid, collections of loan instalments had substantially reduced due to stringent lockdown and extension of the moratorium on loan repayment.
The monthly collection ratio of securitised pool remained stable due to the limited impact of restrictions imposed by local administration and digitalisation of payment collections by companies, according to rating agency Crisil.
Collection efficiency in securitisation transactions rated by Crisil ratings showed the collections by mortgage-backed securities pools, vehicle pools, two-wheeler pools, and SME pools remained above 96% in February.
“The restrictions imposed to combat the pandemic’s spread in the third wave have been comparatively less intense than those in earlier waves. Additionally, many efforts have been made by several financing entities to digitalise their collection processes. Both these factors have quarantined securitised pool collections from any material impact arising out of pandemic related disruptions during the third wave,” Krishnan Sitaraman, senior director and deputy chief ratings officer, Crisil Ratings said in a release.
During the first wave of covid, collections of loan instalments had substantially reduced due to stringent lockdown and extension of the moratorium on loan repayment. Collections have started improving for the non-banking finance companies (NBFC) after the opening of the economy amid the unlocking process.
NBFCs had taken a lot of efforts such as rejigging of operations, retraining of staff, and re-orientation of expenditures. Despite the bout of tremendous stress on underlying borrowers in pools, there was very few downward ratings action. During the times when collection ratios were dented severely, credit enhancements came to the fore to iron out the collection shortfalls.
Rohit Inamdar, senior director, Crisil Ratings, said NBFCs solid performance in the past two years is an indicator to investors that securitisation remains a reliable, time-tested route to gain exposure to quality loan assets.