NEW DELHI: Auto loans originating from southern states of India exhibit lower loss rates than loans from other states, according to Moody’s Investors Service.
The report by Moody’s also points that with 40 per cent of total commercial vehicle (CV) loans are backing Indian auto asset back securities(ABS) from southern states. It states that the losses in auto asset-backed loans are currently low on an average and the trend would continue in the medium term.
In its analysis based on the performance of 70 Indian auto ABS backed by CV loans originated between 2009 and 2016 by eight different financiers, and with a total initial pool principal amount of Rs 11,500 crore. In India most of the auto loans are securities (ABS) in India are backed by CV loans.
Auto ABS losses vary at different times and between loans with different characteristics, driven by a number of key loss drivers, Moody’s said in a statement.Economic conditions represent a key loss driver, and the performance of CV loans is highly correlated to it, added.
“Our analysis shows that Indian auto ABS loss rates arelow overall, averaging 1 per cent, and will likely remain low over the near to medium term,” Dipanshu Rustagi, Moody’s Assistant vice president and analyst said.
Moody’s also found that higher Interest rate loans are associated with higher loss rates, and that lenders price auto loans according to their assessment of the riskiness of borrowers.“Loans that are at least a year old show lower loss rates when compared with less seasoned loans. And, loans with higher loan-to-value ratios typically demonstrate higher loss rates,” it added.