In a sign of economic activity picking up in the country post lifting of the lockdown measures, a lot lesser number of entities and individuals have come forward to take advantage of the extended period of moratorium on repayment of term loans and interest on working capital loans.
According to a research by Emkay Global Financial, while moratorium rates in Phase 2 are lower (down from 30s to 20s), mainly due to lower corporate moratorium and moderation even in retail segments like housing loans, personal loans and car loans, they have remained elevated for the commercial vehicle segment.
For micro finance players, moratorium rates fell to 30-50 percent with collections improving, the research report said.
As part of the COVID-19 relief package, the Reserve Bank of India in early May extended the moratorium on term loans and interest on working capital loans by three months till August 31. Earlier it was given for a three-month period from March till May end.
The lowering of rates for moratorium, meaning lesser numbers opting not to repay their loan obligation during the moratorium period, is also a result of bankers becoming a bit conservative during the Phase 2 period. Unlike the blanket moratorium in Phase 1, bankers conservatively gave the ‘opt-in’ option apart from monthly moratoriums.
While lowering of moratorium seekers has come as a relief, there has been high level of customer overlap rate between Phase 1 and Phase 2. This is at a high of 30-40 percent in select segments, indicating a long moratorium period for these customers, which may pose higher asset-quality risk.
Bankers suggest that job losses/pay cuts till now have been lower than expected, but one needs to be watchful as these are early days of the unlocking. However, the self-employed category (contributing 25-40 percent of select retail loans) is badly hurt, posing a major concern, the report said.
On a positive side, collection rates improved to 40-55 percent in June for banks from a low of 10-15 percent during the lockdown. But the road to recovery back to more than 90 percent level will be long and arduous, the report said.
Also, cheque/ ECS bounce rates remained high at 37-38 percent in non-moratorium customers during the lockdown as against 17-20 percent in earlier years, indicative of systemic stress.
As per CIBIL, early asset-quality indicators have been weak since the past one year in mortgages/cards, making them vulnerable to asset-quality shocks.
“Apart from these segments, we believe delinquencies in personal loan, two-wheeler loan and commercial vehicle loan too may accelerate, which, coupled with slower credit growth, will shoot up NPAs,” the report said.
Retail GNPA ratio for banks under coverage stood at 1.5 percent in FY20, which could potentially inch up to 3.5 percent in FY21E with some spill-over effect even in FY22E, though better clarity on possible trend could emerge once the moratorium is lifted.