Auto-debit Payment Bounces Fall in Oct as Collections impoves

In sings that assets quality stress is easing, debit bounces rate _ or, the percentage of auto debit payments that failed out of total such transactions initiated _ for October stood at 24.8% by value, the lowest since the pandemic began in march last year.

Data from National automated clearing house (NACH), a clearing service for interbank transaction run by the national payments corporation of India (NPCI), show that the bounce rate reduced 60 basis points month on month from 25.4% in September, indicating a continuing trend that loan collections are on the rice for lending institutions.

In volume, the bounce rate stood at 31.2% in October against 31.7% in September.

In august, bounce rated by volume and value stood at 33% and 26.8% respectively, while in july they were 33.2% and 27.4%

“With easing of lockdown restrictions across the country and several sectors returning to pre Covid levels during the September quarter many banks witnessed a strong recovery in collections, “said Suresh Ganapathy, associate director at Macquarie capital. “we expect the asset quality situation to improve further, driven by reduction in retail well as data suggests that reduction in stress, asset quality concerns remain as data suggests that bounce rates are yet to reach 2019 levels.

A Macquarie research shows that between 2017 to 2019, the bounce rates for October on an average have been around 25% by volume and 22% by value.

The current bounce rates by value are 300-400 bps higher than pre- Covid levels.

Overall, bank slippage ratios reduced substantially by 100 bpd sequentially on an average in the September quarter, signaling reduction in system-wide stress levels.

“Overall we expect NPA (non-performing assets) rations to mode rate due to lower slippages and higher recovery as most banks, barring a few small private banks, sit on a comfortable provision cover, “said Annand Dame, session cover, “said Annand dame, senior Elkay Global. S-ET

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