Bounce rates for automatic debit transactions increase in April
In a worrying repeat of the economic distress caused by Covid-19 last year, recurring transaction rebound rates were high in April.
Data captured by the National Payments Corporation of India from its National Automated Clearing House (NACH) platform also reveals that the number of unsuccessful direct debit requests in April started to rise again after remaining low in March. .
According to NPCI data, out of the total of 8.54 crore of automatic debit transactions on the NACH platform in April, 5.63 crore were successful while 2.9 crore were returned. This reflects a rate of return or rebound of 34.05% in April compared to 32.76% in March.
The rate of unsuccessful transactions in April is however still lower than that of previous months like February and January where it was just over 36% and the peak of 45.4% in June 2020.
The issue was also pointed out by HDFC Bank during its call to analysts in the fourth quarter, when management noted that rebound rates started to rise in April, which could be a sign of growing systemic stress.
Other banks are also keeping their eye on repayments and the Reserve Bank of India’s Restructuring 2.0 framework should help small borrowers overcome the current uncertainty.
“The efficiency of collection in April was lower and the impact was felt in the SME and MSME segment and less in the employee segment. There is a good chance that May will see a similar trend. However, this time around, there has been no reduction in wages or loss of jobs in the organized sector so far, ”noted Gaurav Gupta, CEO of MyLoanCare.in.
Analysts hope that with limited lockdowns, economic distress will not be as much as last year
“We estimate that severely affected states account for about 48% of retail credit and about 56% of overall credit. Again, self-employed categories will bear the brunt of localized lockdowns, ”said a report from Emkay Global Financial Services.
He expects that among retail assets, which make up around 31 percent of overall credit, the self-employed category will account for almost a third – although the impact will be largely limited to loans to businesses, loans for property and to the portfolio of MFIs.
A recent SBI Ecowrap report also noted that the NPCI-NACH throughput yield percentage peaked in June 2020 and has been trending down since then. The yield percentage (in value) fell to 27.5% in March 2021 from the peak of 38.1% in June 2020. Even the volume percentage fell to 32.8% from 45.4% during from the same period.
“With various state and district level restrictions imposed in April, it remains to be seen whether this affects future recurring payments,” he said, however.