‘Commercial vehicle loans ride on drop in diesel price, positive industrial growth’

 The Dollar Business Bureau Commercial vehicles loan seems to be on the recovery path, thanks to falling diesel prices and rising industrial growth, a study has said. According to India Ratings and Research (Ind-Ra), the Early Delinquency Index (EDI)— a tool to measure the frequency of loan default cases— has come down to 7.19% in February 2015 from 8.05% in the same month last year. Transactions securitised in 2014 have shown better performance with initial 90-plus days past due delinquencies (DPD) being on a lower level than that witnessed in 2013 vintage transactions. On the other hand, loans on construction equipment remain stressed mainly due to the slow growth rate in mining and infrastructure sectors. In February, weighted average (WA) 90-plus DPD delinquency rose to 4.94 % from 3.23% in February 2014. Higher delinquencies were observed vintage transactions of 2013 and 2014 with WA 90-plus DPD delinquency reaching to 5.36% and 4.50% in February this year, respectively. However, no negative rating actions have been taken due to the availability of excess interest spread and sufficient credit enhancement levels. The performance of credit has also dipped in the tractor segment. The weighted average of 180-plus DPD delinquency for tractor loans has increased to 3.79% (WA amortisation of 78.16%) in February 2015 from 2.98% (WA amortisation: 57.0%) in March 2014. “However, negative rating actions were not taken and also are unlikely to be taken given the significant amortisation and available credit protection,” the Ind-Ra study said. The research attributed the fall to negative growth in agricultural GDP of 0.36% in December 2014 from 4.18% in March 2014. “The lesser growth in minimum support price and lower-than-long-term average rainfall in 2014 negatively impacted the performance of tractor loans,” the paper said. A stable performance was observed in the mortgage loans. The vintage transactions of 2014 performed better than all other vintages with no loans moving to 60-plus days past due delinquency buckets.    

May 15, 2015 | 5:30 pm IST.