Bounce rates for auto debit transactions touched pre-Covid levels in October this year indication lower stress amongst borrowers with the opening up of the economy.
The bounce rate or percentage of unsuccessful auto debit transactions in October 2021 was 31.2 per cent, according to data with the National Payments Corporation of India from the National Automated Clearing House (NACH).
This is the lowest level since January and February 2020 when the bounce rate was 31.04 per cent and 31.46 per cent respectively.
Overall, of the 8.65 crore auto debit transactions presented on the NACH platform in October, 5.95 crore or 68.8 per cent were successful while 31.2 per cent were returned.
NACH is a web based solution to enable interbank, high volume, electronic transactions which are repetitive and periodic in nature. Typically, auto debit transactions are for recurring payments such as EMIs and insurance premium although it does not capture intra-bank transactions.
The bounce rate for these transactions has been gradually coming down since July this year after it peaked to 36.5 per cent in June during the second wave of the pandemic and local State level lockdowns that hampered economic activity.
Significantly, the volume of auto debit transactions has also increased from just 7.77 crore in January last year, which declined to 6.4 crore in May 2020.
Most banks and NBFCs have reported improved collection efficiency, at pre-Covid level for many, in the second quarter results.
Earlier this month, Mahindra Finance reported that in October 2021, its collection efficiency was at about 91 per cent. While this was lower compared to the second quarter of the fiscal, it is ahead of October 2020 collection efficiency of 89 per cent, it had said.
Similarly, CreditAccess Grameen said collection efficiency excluding arrears improved to 93.3 per cent in the second quarter of the fiscal and further to 94.3 per cent in October.
“Market feedback and collection efficiency reported by a few lenders suggest normalisation kicking in with improvement in collection efficiency from mid-June once there was easing of restrictions and lockdowns,” said a report by ICICI Securities early last month.