Indian ABS Performance Risks Remain Despite Better Collections: Moody's

Mumbai: Indian asset-backed securities (ABS) performance risks will remain elevated over the next 12 months, as weak economic conditions will continue to hurt borrowers' ability to repay loans, Moody's Investors Service said in a new report on Thursday.

"As payment moratoriums came to an end in August, collections in rated Indian ABS improved markedly in September and October, although they remain below pre-coronavirus levels," said Dipanshu Rustagi, a Moody's Assistant Vice President and Analyst.

According to Moody's Investors Service, delinquency rates for rated auto and micro, small and mid-size enterprise (MSME) loan ABS have increased, indicating that some borrowers are not able to resume or sustain repayments amid the deep economic contraction.

"Given weak economic conditions, asset performance risks will remain elevated in this environment and we expect delinquencies in auto loan ABS and MSME loan ABS will continue to increase over the next 6 to 12 months," adds Rustagi.

As per the report, new government support measure and existing transaction features will mitigate some of the risk.

In November, the Centre announced a new fiscal support measures which are expected to benefit borrowers in the MSME sector.