Auto debit payment bounce rates remain unimpacted by third wave

The third wave of the Covid-19 pandemic, which impacted large parts of the country in January, however does not seem to have impacted loan repayments, as reflected in the bounce rates for auto-debit transactions

Data from the National Payments Corporation of India (NCPI) from the National Automated Clearing House (NACH) indicates that the volume of unsuccessful auto debit requests was at an all time low in January this year.

The bounce rate or percentage of unsuccessful auto-debit transactions in January was 29.6 per cent with just 2.76 crore returns from the 9.34 crore mandates processed last month. As many as 6.57 lakh mandates were successful.

Auto debit transactions are made for payments relating to telephone, electricity, water, loans, investments in mutual funds, insurance premium.

Bounce rates have been coming down steadily from a high of 45.4 per cent in June 2020 and touched 29.9 per cent in December 2021. There was a slight pick up in the bounce rate in the second wave of the pandemic in the first quarter of the fiscal with bounce rate peaking at 36.5 per cent in June 2021 and then gradually coming down.

The data indicates that income of borrowers remained insulated from the third wave of the pandemic.

Banks and NBFCs have been confident that the third wave of the pandemic will not impact repayment capacity of borrowers as it did not lead to significant lockdowns that impacted lives and livehoods of people.

“It appears that since the lockdowns were not very severe, economic activity, income and collection efficiency did not get impacted in January. The bounce rate, infact, continued to improve and reduce further,” said Anil Gupta, Vice President and Sector Head - Financial Sector Ratings, ICRA.

He, however, noted that a sizeable portion of EMI presentation and collection typically happens in first 10 days of the month.

“In January, the first 10 days saw the third wave picking up but not reach its peak. Hence, a better picture of the impact of the pandemic on repayments may be available with data from February. But hopefully, the situation would have continued to improve,” he said.

Collection efficiency

Many have reported that collection efficiencies in January remained unscathed from the pandemic.

Mahindra Finance had reported that collection efficiency was at 96 per cent for January 2022, up year-on-year from 94 per cent in January 2021, in line with expectations.

Significantly, the volume and number of auto debit mandates processed has also risen steadily from just 8.39 crore mandates processed in January 2021, indicating steady user acceptance.