NEW DELHI: Emphasizing the continuing building up of stress due to the halt in economic activities, the number of failed recurring transactions, or auto-debit bounce rate, have again gone up in May.
Data captured through the National Automated Clearing House (NACH) showed that 35.91 per cent or 30.8 million such transactions failed in the month of May.
NACH processes auto-debit transactions for bank accounts for recurring payments like loan equated-monthly-installments (EMIs), utility bill payments, and insurance premiums.
The NACH platform is largely used to collect payments for loans, investment in mutual funds, and insurance premiums. But the largest chunk of these transactions, about 80 per cent, are for Equated Monthly Installments (EMI) alone.
In April, the bounce rate stood at 34.05 per cent, higher by 130 basis points compared to 32.8 per cent in March. In terms of volumes, 29 million auto-debit transactions worth Rs 22,000 crore failed in April primarily due to lack of funds.
To be sure, this is not the highest default rate on auto-debit transactions since Covid-19 hit. Bounce rates in June 2020 went up to as much as 45.37 per cent of total transactions, before starting to decline to about 36 per cent in January this year, and 32.8 per cent in March.
The stress in payments comes at a time when most banks have been warning of elevated stress in retail loans.
HDFC Bank CEO Sashidhar Jagdishan had recently said that retail loans may see higher delinquencies in the near term.