The worst floods in a century that inundated large parts of Maharashtra including its capital, Mumbai, seem to have had little impact on auto loan repayments, as few borrowers have defaulted on their payment commitments. Thjis is revealed ina recent survey by rating agency CRISIL

CRISIL has analysed the impact of the recent floods in Maharashtra, on the credit quality of 'asset backed securitisation' (ABS) transactions backed by car loan receivables. CRISIL's preliminary analysis reveals that there will be no impact on the outstanding ratings of these transactions.

The floods that hit the state on July 26, 2005, damaged many cars and impacted their resale values, posing a potential threat to the performance of ABS pools. Although the complete impact of the floods can only be gauged over a period of about six months, CRISIL has assessed the immediate impact by analysing the collection and delinquency patterns of CRISIL-rated car pools. The pools have a principal outstanding of Rs13 billion including about Rs.2.5 billion in Maharashtra. The analysis also included discussions with all the major companies in the car finance industry, for their feedback on collection delays and their strategy for coping with the possible rise in delinquency.

CRISIL compared the performance of rated pools in the pre-flood collection month of July 2005 and the post-flood collection month of August 2005. The analysis reveals no substantial difference in the monthly collection ratio (monthly collection ratio (MCR) is the ratio of total collections in a month as a percentage of the month's billings) in the securitised pools in these payout months. Although the MCR of securitised pools across India reduced marginally from 102.7 per cent in July to 102.2 per cent in August, the MCR for the contracts in Maharashtra remained stable at 98.2 per cent in both months.

Discussions with the major players in the car finance industry indicate no significant increase in delinquency levels. CRISIL will continue its dialogue with the major players, and its analysis of collection and delinquency patterns, to assess the full impact of the floods on the Maharashtra car loan portfolio.