Fewer Emi Bounces Point To Drop In Loan Defaults | India Business News - Times of India

Fewer Emi Bounces Point To Drop In Loan Defaults | India Business News – Times of India


MUMBAI: Debit bounce rates on bank accounts hit their lowest level since May 2019, indicating an improvement in the asset quality of banks.
Debit bounce rates are released by the National Payments Corporation of India and reflect the standing instructions for payments that have failed for lack of adequate balance.
In February 2022, the bounce rates were 22.4% of transactions by value and 29.2% by volume. In value terms, bounce rates for February 2022 are just around 100bps and are higher than the average levels of around 21.5% seen during Feb 2018-Feb 2020. In volume, terms bounce rates for February on an average have been around 25.8% average in the pre-Covid period (June 2019 to February 2020).
“This indicates that asset quality is likely to improve, and we could see a further reduction in retail NPLs in 4QFY22. The recent geopolitical tensions and the corresponding impact on oil prices, however, could cause some concern in the retail segment, especially in rural and commercial vehicle sections as high fuel prices are passed on to customers,” said Suresh Ganapathy, research analyst, Macquarie in a note.
Although data is available for banks which have experienced the highest level of bounce rates, these numbers may not reflect their loan performance.
According to Macquarie, the impact of bounces is not felt on the destination bank (where the customer has a bank account) but on the sponsor bank which sends the debit request. “Sponsor bank bounce rates have more implications from an asset quality perspective, but here too the sponsor banks may be acting as collection agents of other FIs (eg. NBFCs). Hence, direct implications on asset quality cannot be drawn, based on our understanding,” Ganapathy added.
Bankers said that although the bounce rates are high only a fraction of the amount to delinquency and an even smaller number into non-performing assets.


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