Bounce rates came in at 31.7% and 25.4% by volume and value, respectively, for September. In August, these figures were at 33% and 26.8% by volume and value, respectively, while in July they were 33.2% and 27.4% by volume and value.
A steady improvement in asset quality and collections signals toward a reversal of some of the slippages that banks recorded in the June quarter, analysts say.
A declining trend in bounce rates indicates a reduction in stress levels in the system and improvement in collection rates affected due to lockdown.
“Large slippages seen in retail segment i.e., segments like gold loans, microfinance, commercial vehicle loans where collections were impacted due to lockdowns are expected to see robust recovery with several sectors returning to pre-pandemic levels activity in September,” said Suresh Ganapathy, associate director, Macquarie Capital. “Increased mobility and restoration of supply chains could further boost recovery.”
With the festive season approaching and the pace of vaccination strong, a surge in economic activity across sectors is expected that can further reduce bounce rates.
“Our channel checks show collection efficiency improved in the September quarter, though slippages have been high in the retail and MSME segment the quantum is likely to have moderated sequentially, keeping asset quality in check,” said Yuvraj Choudhary, research analyst with Anand Rathi.
An analysis by Macquarie showed that despite the steady improvement, bounce rates continued to remain above the average levels of 2019. The current bounce rates by value are nearly 300-400 basis points higher than pre-Covid levels.
Most banks and non-bank lenders have reported an increase in fresh disbursements and improvement in collections continues to remain their top priority.
A halt in physical collections by banks and non-bank lenders, strict lockdowns and restrictions has caused a severe dip in loan collection efficiencies, which fell 10-15% between April and May.
Collection efficiencies have been gradually improving with the regularisation of economic activities. In fact, in September, collections for unsecured business loans, consumer durable products and credit cards showed better results.
The vehicle finance segment remained the most vulnerable, with private cars and two-wheelers seeing normalisation in recoveries and commercial vehicle and passenger vehicle loans remaining under stress.