Indian Personal Loans Pools Show Increased Delinquencies- Fitch

Fitch Ratings says personal loan pools in India have shown a higher delinquency compared to other asset categories. The underlying pools of personal loans have shown weak performance, with about 5.5% of the original pool being over 90+days past due (dpd) delinquent.

"Personal loans are unsecured lending; borrowers don't usually specify the purpose for taking these loans. These are typically unproductive usage loans and usually do not generate an income stream," says Peeyush Pallav, Associate Director at Fitch Ratings India.

Fitch monitors closely the key performance parameters for two personal loans-backed transactions originated by ICICI Bank. They include the 90+dpd and 180+dpd prepayments, collection efficiency and charge-offs. These transactions have performed satisfactorily on account of their structures (e.g. chargeoff at 120+dpd to minimise the cost of carry on account of defaulted assets), and adequately sized credit enhancements. However, the underlying pool of personal loans has shown weak performance, with about 5.5% of the original pool being over 90+dpd delinquent. The 180+dpd portion of the pool comprises about 4.2% of the original principal outstanding.

The ongoing transaction performance analysis forms an integral part of the ratings process. Clear and timely reporting is essential for assessing current performance and for forming an accurate credit view. Hence, for active monitoring, Fitch has developed a surveillance process, where the impact of key performance indicators such as delinquencies, prepayment rates, collection efficiency, interest rate movements, and credit enhancement utilisation are examined. The agency ultimately assesses the impact of such indicators on the timely repayment of interest and principal for the pass-through certificates ("PTCs") on an ongoing basis, to ensure that the level of protection available to PTC investors is commensurate with the rating level assigned to the notes.

(This is the press release of Fitch Ratings)

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