According to a report, the collection efficiency of non-bank finance companies (NBFCs) and housing finance companies was between 97 and 101 percent in April.
Collections had seen a modest decline of about 3 percent after the third wave of infections in January 2022, but recovery was rapid, given the lower severity of the COVID variant and limited movement restrictions during this time, ICRA Rating said in a report.
The analysis is based on ICRA classified retail pools securitized by NBFCs and housing finance companies (HFCs).
Securitization refers to the pooling of cash-generating assets (such as mortgages, loans and bonds) and the subsequent issuance of securities in the capital markets backed by these pools of collateral.
“Collection efficiency for NBFCs and HFCs was healthy in the range of 97-101 percent at the start of FY2023,” the report said.
Healthy collection efficiency was observed in the rated securitized pools for April, which is expected to have remained strong in May, it added.
With business activity close to pre-Covid levels for most sectors, coupled with a strong focus on collections by the NBFCs and HFCs, concerns about the efficiency of collections, at least from the non-restructured portfolio of the financiers, the agency said.
Furthermore, the tightening of pool selection criteria by the investors for securitized pools and the strengthening of the prevailing credit assessment processes and parameters by the lenders after the emergence of COVID also positively impacted the overall efficiency of the collection, it said.
The agency’s vice president and group head (Structured Finance Ratings) Abhishek Dafria said collection efficiency is expected to remain broadly stable this fiscal year as long as we don’t see another wave of COVID that results in government shutdowns.
A rise in infections for shorter periods still wouldn’t be much of a concern, given the state governments’ approach during the second and third wave, where lockdowns were more localized and started only when necessary.
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