India’s Economic Growth Increases Likelihood of ABS Loan Repayment

Credit managers conducting business in India have no need to worry when it comes to asset-backed securities (ABS), as Moody’s Investors Services reports a “pick-up” in the country’s economic growth, increasing the likelihood of loan repayment.

India’s economy grew 6.2% in 2017, with expectations even higher at 7.6% this year. As borrowers rake in a steady income, Moody’s said this will enable them to repay their loans that back ABS. Such loans include auto loans as well as loans against property (LAP) to micro, small and medium enterprises (MSMEs).

“Auto ABS delinquency rates will remain stable at current levels through 2018, but delinquency rates for small- and medium-size enterprise ABS backed by [LAP] will continue to rise …” Moody’s Analyst Vincent Tordo said in a press release.

Tordo explained demand for freight transportation is increasing and noted that commercial vehicle (CV) loans back auto ABS in India. Therefore, such demand creates more revenue for CV operators, providing them with the funds to repay.

-Andrew Michaels, editorial associate

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