Nonbank financial corporations had robust collection efficiency in April: report

NBFCs saw robust collections in April 2022, ICRA report says

Mumbai:

The collection efficiency of non-bank financial companies (NBFCs) and housing finance companies was in the healthy range of 97-101% in April, according to a report.

Collections had seen a slight decline of around 3% after the third wave of infections in January 2022, but the recovery has been rapid, given the lesser severity of the COVID variant and limited restrictions on movement during this period. , said the ICRA Rating in a report.

The analysis is based on ICRA-rated retail pools securitized by NBFCs and housing finance companies (HFCs).

Securitization refers to the pooling of cash-generating assets (such as mortgages, loans, and bonds) and the subsequent issuance of securities in capital markets backed by these collateral pools.

“NBFC and HFC collection efficiency has been healthy, in the range of 97-101% at the start of FY2023,” the report said.

Good collection efficiency was seen in its April-rated securitized pools, which should have remained strong in May, he added.

With business activity close to pre-Covid levels for most sectors, coupled with a heavy focus on recoveries by NBFCs and HFCs, concern over the effectiveness of recoveries, at least from the non-restructured portfolio of financiers , has eased, the agency said.

In addition, the tightening of pool selection criteria by investors for securitized pools and the strengthening of prevailing credit assessment processes and parameters by lenders following the emergence of COVID have also had a positive impact. on the overall effectiveness of collection, he said.

The agency’s Vice President and Group Head (Structured Finance Rating), Abhishek Dafria, said collection efficiency should remain largely flat this fiscal year, as long as we don’t see any new wave of COVID resulting in lockdowns by governments.

Any increase in infections for shorter periods would still not cause much concern, given the approach taken by state governments during the second and third waves where lockdowns were more localized and initiated only when necessary.

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