NEW DELHI: Highlighting the continued build-up of stress due to the shutdown of economic activities, the number of recurring transaction failures, or direct debit bounce rates, increased again in May.
Data entered by the National Automated Clearing House (NACH) showed that 35.91% or 30.8 million of those transactions failed in May.
NACH processes automatic debit transactions for bank accounts for recurring payments such as Monthly Equivalent Payments (EMIs), utility bill payments, and insurance premiums.
The NACH platform is widely used to collect loan payments, mutual fund investments, and insurance premiums. But the bulk of those transactions, around 80 percent, are for Equal Monthly Payments (EMIs) only.
In April, the rebound rate stood at 34.05%, up 130 basis points from 32.8% in March. In terms of volumes, 29 million automatic debit transactions worth Rs 22,000 crore failed in April, mainly due to a lack of funds.
Admittedly, this is not the highest default rate on automatic debit transactions since the coup of Covid-19. Bounce rates in June 2020 hit 45.37% of total trades, before starting to drop to around 36% in January this year and 32.8% in March.
The stress in payments comes at a time when most banks have warned of high stress in personal loans.
HDFC Bank CEO Sashidhar Jagdishan recently said personal loans could see an increase in delinquencies in the short term.