The economy of the villages has been badly affected by the second wave of corona. Lockdown and overnight curfews imposed by the states to prevent infection have caused serious losses to rural businesses and employment. As a result, the vast majority of the rural population is not in a position to repay the loan. Because of this, loan default cases can increase rapidly. This information is obtained from India Ratings report.
According to the report, debt repayment cases are expected to increase in rural areas this year. Due to the impact of demand, the entire year of the credit crisis is going to be a crisis for banks. This was confirmed by those who did not default on the EMI of the loan in April. Their numbers have increased rapidly. There are fears that May’s debt pool collection (June payment) will also fall. Of all transactions evaluated by the rating agency, debt collection fell to 73 percent in April, up from 84 percent in the previous month. Significantly, many banks have had to discontinue home-to-home collection after many procurement agents, bank employees and borrowers fell ill during the rapid second wave that broke out between March, April and May.
Increased bounce in auto debit trading
Due to the second wave of corona, auto debit payments have been bouncing back for the second consecutive month since April. The disturbance in economic activity is an indication of increased economic pressure on people. Of the 8.57 crore transactions in May, 35.91 per cent or 3.08 crore transactions failed. There were 8.54 crore auto debit transactions in April, of which 5.63 crore were successful and 2.908 crore were unsuccessful. Thus, the number of failed transactions during the month was 34.05%. In June last year, auto-debit transaction failure cases were recorded when the failure rate was over 45 per cent.
There was improvement from December to March
When the second wave began in March, the percentage of auto debit trading bouncing was lower compared to total transactions. In that month alone, 32.7 percent of self-debit payment transactions failed. On the other hand, the percentage of failed auto debit requests has been steadily declining since December, indicating greater regularity in monthly installment (EMI), utility and insurance premium payments.
Companies have backed away from borrowing
Amidst the corona crisis, companies have backed away from investment due to lack of demand. Due to this, companies have slashed Rs 1.70 lakh crore debt. Cutting companies include the oil, steel, fertilizer and cement sectors. Of the more than 1,000 units listed, the top 15 sectors have a deficit of 1.70. According to the report, there is currently no institutional desire for new investments as the economy is still recovering from the second wave. According to the new investment announcements, the outlook for investment has slowed, with the FY2021 falling 67%, according to CMIE. Companies are taking advantage of the short-term structure of interest rates to facilitate lower financing costs and reduce debt liabilities from the capital market. Also, the top 1,000 companies increased their cash and bank balance by about 35% in March this year compared to March 2020.
