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September 30, 2017

CRISIL Performance Report - ABS & MBS Pools - September 2017

Commercial Vehicles (CV)


Despite pre-buying in March on account of Bharat Stage-IV regulations and slower economic growth, truck rentals remained resilient between March 2017 and May 2017. The rentals were supported by the healthy movement of agricultural produce giventhe near-record rabi output. Consequently, performance of CRISIL rated CV pools exhibited a favorable trend in the first quarter offiscal 2018 (payouts pertaining to April 2017 to June 2017 or collections pertaining to March 2017 to May 2017).


Delinquencies in pools originated in 2015 continued to fall during the quarter and stood at 2.3% at 26 months post securitisation(MPS). Incremental overdues between 6 MPS and 12 MPS for 2016 vintage pools, which had seen a jump in overdues postdemonetisation,are significantly lower than that observed in pools from earlier vintages. Additionally, the early performance ofpools from 2017 vintage is far superior to the pools evaluated since 2013 and comparable to the initial delinquencies of 2009-2012 vintages.


The distinctly better performance of 2017 vintage pools is because of two reasons:

  • Higher proportion of loans backed by new vehicles in the underlying pools – four of the six pools evaluated in the year andhaving performance during the quarter were predominantly new vehicle financing pools, compared to just three pools out ofthirteen evaluated in 2016.
  • Lower proportion of overdue contracts in underlying pools at the time of securitisation – percentage of delinquent contractsin 2017 pools (median) was 3.5%, while the figure for 2016 vintage was 8%



Performance remains varied across originators


Collection performance of microfinance pools, which were in a very narrow band close to 100% for several years before thedemonitisation, now vary widely depending on the originator and geographic spread of the underlying contracts.


A few pools with limited exposure to vulnerable states, such as Uttar Pradesh, Maharashtra, Madhya Pradesh and Karnataka,continued to post near 100% MCRs. However, MCRs of pools originated by certain NBFC-MFIs remain persistently weak at lessthan 75% collection efficiency. CRISIL analysed in detail the performance pools from across originators under surveillance (bottom~33 percentile of the pools were kept out of the scope of this study as these were not representative of the industry). Based on theanalysis, the median collection performance of the industry is currently stabilising around a new normal, well below the 99.9%collection efficiency of the industry in the pre-demonetisation era.