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19
January 2017
Global credit rating agency Moody's
Investors Service and its Indian affiliate ICRA Ltd. on Thursday said the
performance of commercial vehicle (CV) loans backing asset based securities
(ABS) and the residential mortgage backed securities (RMBS) will be stable in
2017.
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"Delinquency rates for CV loans
backing ABS transactions should increase in the short term, owing to the
country's demonetisation," said Dipanshu Rustagi, a Moody's Analyst.
"Nevertheless, CV loan
delinquencies should fall back to around 2016 levels over the course of 2017,
owing to India's robust economic growth and low oil prices." The Total Investment
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Moody's expects oil prices to remain
low in 2017. Moody's forecast Brent crude oil price of $45 a barrel in 2017,
with a price band of $40-$60. The Total Investment & Insurance
Solutions
Low oil prices are positive for the
performance of CV loans, because fuel accounts for 40-50 per cent of the costs
of CV operators.
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"On the home loans, arrears for
mortgages backing Indian RMBS should remain low throughout 2017, supported by
lower interest rates, and the fact that most of the homes were purchased by
owner-occupiers," said Vibhor Mittal, an ICRA Vice President.
Home loans in India have adequate
collateral cover, with initial loan-to-value ratios of around 60-80 per cent. The Total Investment
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Moreover, in most cases, the
underlying property is occupied by the borrower, a credit positive. The
eventual loss to the lenders -- post liquidation of the collateral -- should
therefore stay low.
In addition, ICRA explains that
factors like favourable demographics -- in particular, a young working
population and the rapid nuclearisation of families -- strong latent housing
demand, and the government's accommodative policy will continue to provide
impetus to the housing sector.
ICRA points out that entities
operating in the affordable housing segment -- catering to borrowers with
marginal repayment capacity and showing a greater reliance on cash collections
-- could witness an uptick in early delinquencies. The Total Investment
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On the other hand, the prime housing
loan segment, dominated by salaried borrowers, have not been impacted much by
demonetisation.The
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