Auto debit bounce rate falls sharply in September

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The NACH debit bounce rate by value for September were at their lowest level since the epidemic began, indicating that asset quality is improving. Bounce rates decreased 130-140 basis points month over month, according to data from the National Automated Clearing House (NACH}, the NPCI’s clearing agency for interbank transactions, The Economic Times has reported.

In September, the bounce rate was 31.7% by volume and 25.4% by value. It was 33% and 26.8% by volume and value, respectively, in August, and 33.2% and 27.4%, respectively, in July.

The report quoted analysts as saying that a continuous improvement in asset quality and collections points to a reversal of some of the slippages that banks experienced in the June quarter.

Bounce rates that are decreasing suggest that the system is under less stress and that collection rates impacted by lockdown are improving.

“Large slippages in the retail segment, such as gold loans, microfinance, and commercial vehicle loans, where collections were hampered by lockdowns, are projected to experience a robust rebound in September, with numerous sectors returning to pre-pandemic levels of activity,” the report quoted Suresh Ganapathy, associate director, Macquarie Capital as saying. “Increased mobility and the re-establishment of supply chains could help the recovery process even more.”

With the holiday season approaching and vaccination rates remaining high, a boost in economic activity across industries is forecast, potentially lowering bounce rates even further.

“Though slippages have been high in the retail and MSME segments, our channel checks reveal that collection efficiency improved in the September quarter, and the quantum is expected to have moderated sequentially, keeping asset quality under check,” the report quoted Yuvraj Choudhary, research analyst with Anand Rathi as saying.

Despite the continuous improvement, bounce rates remained above the 2019 average levels, according to a Macquarie research. Bounce rates by value are about 300-400 basis points higher than they were before Covid.

The majority of banks and non-bank lenders reported an increase in new disbursements, with collection enhancement continuing to be their top focus.

Loan collection efficiencies had dropped 10-15% between April and May due to a halt in physical collections by banks and non-bank lenders and rigorous lockdowns and limitations.

With the regularisation of economic activity, collection efficiencies have gradually improved. Indeed, collections for unsecured company loans, consumer durables, and credit cards performed better in September.

The vehicle finance segment remained the most susceptible, with recovery rates for private vehicles and two-wheelers returning to normal, but commercial vehicle and passenger vehicle loans remained stressed.