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27
January 2017
 |
Fitch (The Total Investment & Insurance
Solutions)
Global
credit rating agency Fitch Ratings on Friday said repayment of Indian auto
loans got affected by demonetisation and it would take a couple of months for
collections to come back to normal levels. The
Total Investment & Insurance Solutions
In
a statement, Fitch said: "Demonetisation appears to have had a negative
impact on Indian auto loan repayments, based on collection reports from
Fitch-rated securitisation transactions."
"It
is possible that collections will fall further in early 2017, and we believe it
could take at least another two to three months for collections to return to
normal," Fitch added.
According
to Fitch, small auto loan borrowers have been affected the most but that would
not impact credit ratings as there are sufficient external credit enhancement
to cover the likely short-term impact on the lenders rated by it. The Total Investment & Insurance Solutions
Fitch
said the cash shortage has affected used vehicle operators more than the new
vehicle borrowers. The Total Investment & Insurance
Solutions
Pools
backed predominantly by used vehicle loans saw an average drop in collections
of 130 basis points (bp) in November 2016. Those with a higher concentration of
light and small commercial vehicles, which again have relatively weaker
borrower credit profiles compared with medium and heavy vehicle owners, also
dropped significantly by almost 200bp, Fitch said.
The
collection of pools securitised in 2016 fell by an average 120bp compared with
80bp for pools securitised before 2016. The
Total Investment & Insurance Solutions
More
seasoned pools are on an average likely to have more experienced borrowers,
with a stronger ability to meet their repayments. The Total Investment & Insurance Solutions
Furthermore,
borrowers in seasoned pools will on an average have serviced their loans for
longer and have higher equity than those in less seasoned pools, leading to a
greater willingness to pay.
All
Fitch-rated transactions are currently able to withstand a 30 per cent drop in
collections for a minimum of eight months and an average of 22 months, the
rating agency said.The Total Investment
& Insurance Solutions
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