Demonetisation affected repayment of auto loans: Fitch Ratings

Global credit rating agency Fitch Ratings on Friday said repayment of Indian auto loans got affected by demonetisation and it would take a couple of months for collections to come back to normal levels.

In a statement, Fitch said: “Demonetisation appears to have had a negative impact on Indian auto loan repayments, based on collection reports from Fitch-rated securitisation transactions.”

“It is possible that collections will fall further in early 2017, and we believe it could take at least another two to three months for collections to return to normal,” Fitch added.

According to Fitch, small auto loan borrowers have been affected the most but that would not impact credit ratings as there are sufficient external credit enhancement to cover the likely short-term impact on the lenders rated by it.

The collection of pools securitised in 2016 fell by an average 120bp compared with 80bp for pools securitised before 2016.

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