Across a number of asset classes, demonetisation’s impact on CRISIL rated securitised pools reflects a V-shaped recovery. The announcement of the demonetization process on November 8, 2016, impacted loan repayments in various retail asset classes in November 2016. Unavailability of legal tender due to withdrawal restrictions severely hampered collections for most non-bank lenders. Borrowers preferred prioritising the use of cash for personal needs, rather than to service debt
Loan waiver rumours linked to the Reserve Bank of India’s (RBI’s) notification on deferral of asset classification norms added to the woes of financiers. Asset classes where collections were predominantly in the form of cash witnessed a sharp drop in collection efficiencies. The impact of demonetization was not restricted to any specific geography and was a pan-India phenomenon.
However, come December 2016 and collections began to recover across loan segments. Most financiers had helped educate borrowers by then regarding the benefits of using bank facilities and aided them in opening bank accounts. In some regions, such as the south, return to normalcy was early, due to the higher penetration of banking channels in these states.