The pandemic has hit significantly hit retail payments across the country, as the number of borrowers failing to pay their monthly EMIs has surged in April 2021. According to the National Payments Corporation of India’s (NPCI) data, 34.1% of auto-debit transactions facilitated via the National Automated Clearing House (NACH) failed in April 2021.
The primary reason for the alarming failure rate is due to insufficient funds. In March 2021, the failure rate stood at 32.8%. Interestingly, repayments were improving until March 2021, just before the second Covid-19 stormed into India. It is important to note that this data is only for inter-bank mandates, which means a transaction between a bank and a non-bank lender.
Banks are also witnessing higher cheque bounces. The overall scenario indicates that borrowers are not willing to repay their loans. Moreover, lending experts are pointing that the figures for May could prove to far worse than April, as the country has practically moved into a national lockdown.
The second Covid-19 wave is proving to be deadlier than the first one, with the number of daily cases surging to record highs. The death toll in India has also created new records, catapulting citizens into a situation of grief and fear.
As a result, banks are showing more caution towards the growing number of defaulters, most of whom are self-employed people or those working in informal segments. Many citizens who have lost their jobs are also failing to pay their dues.
In a call with financial analysts, Jimmy Tata, chief credit officer at HDFC Bank Ltd, said on 17 April, “We are halfway through April, so I cannot really comment on the demand resolution for April, but the cheque bounces in April have taken a bit of an upward blip.”