Asset quality of commercial vehicle loans improves, but worsens for tractors

CV loans' early delinquency index remained in the range of 5.2-5.7 per cent since June 2016, indicating an arrest of short-term delinquencies

By: PTI | Mumbai | Published:November 21, 2016 9:15 pm

Delinquencies from the commercial vehicle (CV) space have fallen even as stress in the construction equipment industry and tractor loans remained elevated, India Ratings has said.

According to the rating agency, improvement in performance was witnessed across all vintages of its rated commercial vehicles ABS portfolio as of August and attributed the recovery to the drop in weighted average 90-plus days past due (dpd) delinquency of 2014 and 2015 vintages.

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Also, its CV loans’ early delinquency index remained in the range of 5.2-5.7 per cent since June 2016, indicating an arrest of short-term delinquencies.

“Stress in the construction equipment industry persists, with the six monthly average year-on-year changes in the mining index declining to 0.56 per cent in August from 1.36 per cent in August 2015,” the agency said in a report.

“The improvement observed in the core infrastructure index has not been consistent enough to support the recovery,” it said, adding tractor loans of 2014 and 2015 are experiencing high delinquency levels.

As of August 2016, WA 90 plus dpd delinquency stood at 6.45 per cent for 2015 vintage loans, which is comparable to the loans of 2014 vintage at a similar level of seasoning.

“This, however, will have a limited impact on the transactions, because of high credit enhancement coverage on account of the significant amortisation of pass through certificates,” the rating outfit noted.

The agency also observed a continual rise in portfolio at risk for loans from micro-finance institutions since April-June for its rated MFI securitisations.