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Auto loan repayments facing problems

Auto loan repayments facing problems

Demonetisation appears to have hurt India’s auto loan repayments badly as borrowers of such loans being the worst-hit, rating agency Fitch said in a report. Small auto loan borrowers have been affected the most. Demonetisation is likely to have had a detrimental effect on the income and cash flows of commercial vehicle operators, which could continue to feed through into repayments in the next few months. “We do not expect ratings to be affected. The collections (as a percentage of investor payment obligations) of Fitch-rated Asset Backed Securities transactions dropped by an average of around 1 per cent in November 2016 (the first month of demonetisation), to 101.5 per cent from 102.5 per cent in October,” the report said.

Fitch has received December 2016 collection data for around 40 per cent of its rated transactions, which points to a further average drop of 60 basis points. Borrowers were initially permitted to use demonetised notes for loan repayments, which helped in managing collections in November, it said.

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