Nearly three years after the Covid-19 outbreak, the collection efficiency of microfinance-focused non-banks and unsecured SME (small and medium-sized enterprises) pools has topped 98% of the levels seen in the pre-pandemic days, ICRA has said in a report.Even the delinquency levels are lower by 300 basis points (bps) from their peak levels during Covid-19, the rating agency said.Collection efficiency for non-banking financial companies (NBFCs) and housing finance companies HFCs ) has been healthy in the range of 97% to 105% in the nine months of the current fiscal year, as per an analysis done on ICRA-rated retail pools. "Collection efficiencies have remained robust so far in spite of the global uncertainties, inflationary pressures and rising interest rates," said Abhishek Dafria, vice president of ICRA. "The collection efficiency is expected to remain robust on the back of a strong outlook for the majority of the sectors though the impact of the uncertain global environment is difficult to ascertain at present," he added. Strong domestic growth has supported cashflows of individuals and businesses as they emerge from the stress seen during the Covid period. Tighter underwriting adopted by non-banks coupled with a curated pool selection criterion by investors has resulted in a better quality of retail pools at origination.Focused collection efforts of non-banks, in view of the more stringent asset classification norms for recognising non-performing assets (NPAs), have further supported the loan pool performance.

Source: Economic Times February 13, 2023 07:21 UTC