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Retail loans in stress, but not alarming, say experts

As the moratorium period ended in August 2020, banks are facing some cracks but these stresses are not alarming, said experts. However, there may be some increase in retail stress in the coming quarters. The stress indicated by bank managements is well within the additional Covid-related provisions and the provisioning run rate that banks have been making every quarter.

While a Macquarie report had pegged Non-Performing Assets (NPAs) in this category to double to 4 per cent from 2 per cent levels, financial institutions have stepped up their collection efficiency efforts to improve bounce rates in retail segments.

The National Automated Clearing House (NACH), a clearing service for interbank transactions run by the National Payments Corporation of India (NPCI), shows that bounce rates by volume have gone up to 40.5 per cent, and 31.1 per cent by value. These were 31 per cent and 25 per cent, respectively, in February. NACH is indicative of only a quarter of the total retail payments segment and does not reflect intrabank transactions, or those made by cash or cheque.

At the end of September, most lenders reported collection efficiency levels as much as 95 per cent. The collection effort starts once they fail on payments and generally the cure rates are very high; there is nothing to worry, experts assured.


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