For Quick Alerts
For Daily Alerts

Retail assets see stress after three years: CRISIL

Retail assets see stress after three years: CRISIL
CRISIL Ratings has said that there is a weakness emerging in the performance of retail assets for the first time in three years. Delinquencies in commercial vehicle (CV) loans are increasing, with monthly

collection ratio (MCR) of CRISIL-rated CV pools dropping below 95 per cent for the first time since

2009. This decline in collection efficiency indicates that borrowers are increasingly delaying repayments; there is, therefore, a likelihood of increase in non-performing assets (NPAs) over the next few quarters. Despite this weakness in CV pools, the performance of other retail asset classes, such as housing loans, car loans, and microfinance loans, remains stable.

The median MCR of CRISIL-rated securitised non-mortgage retail pools declined to 94.4 per cent for

the quarter ended December 31, 2012, from 96.2 per cent for the corresponding quarter of the previous year.

The performance of heavy CV loans is the weakest, because of a sluggish economy,industry overcapacity, and increasing input costs. Says Pawan Agrawal, Senior Director, CRISIL Ratings, "A portfolio analysis of the leading non-banking financial companies (NBFCs) that lend to the CV segment reveals that delinquency in near-term buckets is rising. The 90+ days past- due levels, an indicator of loans not repaid for more than 90 days, has increased by about 100 basis points over the three quarters ended December 2012." The sub-par collection levels may continue over the next few quarters, reflecting the adverse impact of reduced freight demand on CV owners and their inability to pass on increases in fuel and labour costs. This has substantially eroded the earnings and debt-servicing capability of transport operators. The delinquencies are, therefore, likely to gradually deepen and move beyond 180 days, leading to a potential rise in NPA levels.

However, the credit protection available to investors in CRISIL-rated CV pools continues to remain

healthy as the impact of lower collections is offset by structural credit enhancement in these pools,


enabling them to withstand the pressure of rising shortfalls.

Read more about: crisil
Story first published: Tuesday, April 9, 2013, 11:15 [IST]
Company Search
We use cookies to ensure that we give you the best experience on our website. This includes cookies from third party social media websites and ad networks. Such third party cookies may track your use on Goodreturns sites for better rendering. Our partners use cookies to ensure we show you advertising that is relevant to you. If you continue without changing your settings, we'll assume that you are happy to receive all cookies on Goodreturns website. However, you can change your cookie settings at any time. Learn more