The whole of the economic disruption caused by the 2-week lockdown will hit the whole of the performance of every commercial vehicle as well as small, medium enterprise loans in Indian asset-backed very more securities according to the current report.
ABS is very much securities such as bonds as well as notes, which have pools of these loans as underlying collateral, sold to the investors. Most of the assets in Indian ABS that Moody’s interest rates are commercial vehicles as well as SME loans.
The agency already assessed that for every commercial vehicle operator, that lockdown will shut off every transport of all the non-essential freight. This would severely constrain operators’ ability to easily earn income as well as repay commercial car loans.
Moreover, slowing the whole of the economic growth would dampen demand for freight transport beyond the time of the lockdown.
Freight interest rates are always declining. Therefore expect the loan delinquencies to increase for the next few weeks or months in this commercial vehicle loan.
This lockdown would already bring most types of SME businesses to the halt, whenever slowing economic growth would also constrain earnings as well as profitability through 2020. It would cause SME borrowers to miss these types of whole loan payments, pushing up delinquency rates in SME ABS for the next few or weeks months, they added.
In furtherance of hurting the whole of the commercial vehicle operators’ financial capacity to repay these types of loans. Borrowers always make loan payments to the collection agents in person. This lockdown would disrupt such types of loan collections, and the overall collections for the pools can already drop significantly, the agency said.
ABS whole of the transactions would simply use the loan collections for March as well as April. Most of the Indian ABS transactions pay both types of interest as well as principal to investors on a predetermined periodic basis. Hence, the whole of the transactions faces a little bit greater liquidity risk.