Most of the NBFCs are waiting for trends in collections in September given the end of the moratorium and the Kamath committee recommendation
Chennai: NBFCs have witnessed 15 to 20 per cent improvement in their collections across different segments of retail lending in the last two months.
Increased optimism has led to overall collection efficiency in segments like micro loans, vehicle finance, affordable housing, according to Motilal Oswal Research.
In case of micro finance collections have improved to 70 -75 per cent by the end of the second phase of moratorium, though disbursements are still muted. Bihar, Uttar Pradesh and Karnataka have posted strong collection performances, while Tamil Nadu, West Bengal, Odisha and Maharashtra have witnessed lower collections due to either prolonged lockdowns or political interference. Sa-Dhan too had observed that overall collection rate has been improving from 35-40 per cent in April, to 45-50 per cent in May, 65-70 per cent in July. Sa-Dhan has been anticipating collection rates to move up to 80-85 per cent by September.
Vehicle finance has seen collections improving to 80–90 per cent, finds Motilal. Vehicle financiers operating in rural and semi-urban locations have seen a faster-than-expected recovery. This is attributable to the focus on partial collections, even from customers under moratorium. Two-wheelers and tractors are the key products to have shown strong traction, with collection efficiency reaching almost pre-Covid levels. Small Commercial Vehicles have also shown improvement.
Affordable housing too has seen 85–90 per cent collections. In south India construction activity is almost back at pre-Covid levels, while in north India it is at 80 per cent of earlier levels. In Mumbai activities are still at just 60–70 per cent of earlier levels. Sales too have picked up to 50 per cent of pre-Covid levels. About 15–25 per cent of retail customers have availed moratorium and most of them have done so largely to conserve cash.
Gold finance continues to see good traction with higher gold prices and increased volume demand. The SME and MSME segments have also seen a healthy improvement in disbursements and collections as businesses are operating at 65– 70 per cent of earlier levels.
Most of the NBFCs are waiting for trends in collections in September given the end of the moratorium and the Kamath committee recommendation. While certain retail lending segments may require restructuring, this would be limited to less than 10 per cent of the portfolio, finds Motilal Oswal.