Auto-debits: Bounce rates at 32 percent in September; repayments still under pressure

The rate of failure of auto-debit transactions on the National Automated Clearing House (NACH) channel remained high at 32% in September, suggesting little improvement in the levels of repayments to banks and non-bank lenders. Though the September level is better than the August bounce rate of over 40%, analysts said the numbers reveal a trend at variance with what lenders would have them believe.

Data from the National Payments Corporation of India (NPCI) showed that of the 8.57 crore auto-debit requests made in September, 3.5 crore were declined. September was the first month after the end of the repayment moratorium for accounts affected by the Covid outbreak. There is no clarity on the asset quality of a large number of accounts after the Supreme Court directed lenders to not classify any accounts as bad loans as long as they were standard on August 31.

With limited visibility on the actual state of asset quality in the September quarter, analysts said only quarterly results of banks could offer some clarity. In a note to its clients on Wednesday, broking firm Jefferies said that the NACH figures were surprising. “While collections have improved by ~17% from August, we had hoped for better trends as moratorium is behind. This is tad disconnected from our feedback from banks/NBFCs and may be partly due to stalemate around the SC verdict, lenders may need to pursue recoveries; clarity in Q2 results will be key,” the report said.

Others feel even the September quarter figures could reveal little and an actual assessment of asset quality may have to wait till after the Q3 numbers are released. A senior analyst with a foreign brokerage said on condition of anonymity, “I frankly don’t believe these banks anymore. They keep telling us things are fine, but then how do you explain this data which is coming from a third party?” Unless bounce rates return to their pre-Covid levels of around 17-18%, or at least fall below 25%, repayments will remain an area of concern.

Bankers insist that the problems brought on by Covid-19 are manageable and the restructuring scheme will take care of fresh stress. On Wednesday, State Bank of India (SBI) chairman Dinesh Khara said that the requests for restructuring that the bank has been receiving give no cause for worry. “The restructuring norms which have been announced are quite liberal and whatever impairment comes as an impact of the Covid times, we will be in a position to handle through the restructuring window and even the earlier measures,” he said.