The collection efficiency of non-banking finance companies (NBFCs) and housing finance companies was in the healthy range of 97-101 per cent in April, according to a report.
The collections had seen a modest decline of about 3 per cent following the third wave of infections in January 2022, but the recovery was prompt, given the lower severity of the COVID variant and limited restrictions on movements during this period, ICRA Rating said in a report.
The analysis is based on ICRA-rated retail pools securitised by NBFCs and housing finance companies (HFCs).
Securitisation refers to the pooling of cash-flow-producing assets (such as mortgages, loans, and bonds) and subsequent issuance of securities in the capital markets backed by these collateral pools.
“The collection efficiency for NBFCs and HFCs has been healthy in the range of 97-101 per cent at the beginning of FY2023,” the report said.
Healthy collection efficiency was witnessed in its rated securitised pools for April which is expected to have remained strong in May, it added.
With business activities close to pre-Covid levels for most sectors coupled with a heavy focus on collections by the NBFCs and HFCs, the concern on collection efficiency, at least from the non-restructured portfolio of the financiers, has reduced, the agency said.
Further, tightening of pool selection criteria by the investors for securitised pools and strengthening of prevailing credit appraisal processes and parameters by the lenders following the emergence of COVID also had a positive bearing on the overall collection efficiency, it said.
The agency’s Vice President and Group Head (Structured Finance Ratings) Abhishek Dafria said the collection efficiency is expected to remain largely stable this fiscal, as long as we do not see any fresh COVID wave that results in lockdowns by the governments.
Any rise in infections for shorter periods of time would still not cause much concern, considering the approach followed by state governments during the second and third waves where the lockdowns were more localised and initiated only if necessary.
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