Auto loan delinquencies to improve in 2016, says Moody's

NEW DELHI: Delinquency rate in auto loan asset-backed securities (ABS) in India is set to improve in 2016 as growth prospects of the economy get better, US-based Moody's Investors Service said today.

In its report Auto ABS -- Asia Pacific - Low interest Rates, positive credit traits will underpin low delinquencies, Moody's said India has high delinquencies rate than in other key markets in the APAC region.

"Delinquency rates in India, which are relatively higher than in other key markets in the region, will improve because of accelerating domestic economic growth," Moody's said.

It said GDP is expected to grow by 7.5 per cent in 2016, up from 7.3 per cent in 2015, leading to a slight decline in auto ABS delinquencies.

"As a net commodity importer, lower commodity prices have benefitted India's economy. The majority of auto loans backing Indian auto ABS are extended to commercial vehicle borrowers.

"These borrowers will benefit from growth in India's GDP and the improving business operating environment that it will produce. Lower oil prices also mean lower operating cost for commercial vehicle operators, which is positive for the performance of loans backing auto ABS," Moody's said.

As regards other major APAC countries it said Auto ABS delinquencies in China and Australia will rise slightly in 2016, but remain low, while in Japan they will remain stable current low level.

Delinquency rate is the percentage of loans within a loan portfolio that have delinquent payments. Delinquent means when an individual, who is within a contractual obligation to make payments against a loan in a timely manner, fails to repay in on time.