Bounce rate eases to 22.5% in April despite inflationary pressures

The bounce rate, which had inched up slightly in March, arresting the downward trend seen before that, has eased again in April and remains comfortably below the pre-pandemic average, despite inflationary pressures impacting consumers’ incomes.

According to the National Automated Clearing House (NACH) data, in April, the bounce rate stood at 22.5 per cent in value terms, down 30 basis points (bps) from March. This was the lowest reading since June 2019.

In volume terms, the bounce rate rose 29.87 per cent in April, up over 20 bps from March. However, the bounce rate both in value and volume terms was below the pre-pandemic average of 24.5-25 per cent and 30.5-31.5 per cent, respectively.

Suresh Ganapathy, associate director, Macquarie Capital, said, “The bounce rate by value...was the lowest seen since June 2019, clearly indicating strong recoveries on the retail asset quality front. We are sanguine about asset quality for banks; despite rising rates, banks should see falling NPLs and credit costs.”

“While there were inflationary pressures which could have impacted the disposable incomes of consumers and consequently the bounce rate, however they have remained fairly stable through this period. The rate hike done by the Reserve Bank of India may not have an immediate impact on the bounce rates but successive rate hikes may pose a problem, going forward,” said Anil Gupta, vice-president and sector head – financial sector ratings, ICRA.

The bounce rate is always higher by volume than value as lower ticket sizes generally tend to bounce more. At the end of each quarter, generally, auto debit payments are high, which may explain the marginal increase in the bounce rate, he added. The unsuccessful auto-debit requests through the NACH platform are generally referred to as bounce rates. NACH is a bulk payment system operated by the National Payments Corporation of India (NPCI) that facilitates one-to-many credit transfers.

These are dividend payment, interest, salary, and pension. They also include collection of payments pertaining to electricity, gas, telephone, water, periodic instalments towards loans, investments in mutual funds, and insurance premium.

They are applicable for interbank mandates or between a bank and non-banking financial company or a fintech lender.

The bounce rate peaked between June and November 2020, highlighting stress in the system due to the Covid-19 pandemic. It started declining from December 2020 as the first wave receded. This indicated higher regularity in equated monthly instalments, utility and insurance premium payments by consumers.

However, the trend reversed in April 2021 because of the second wave, before it started to fall again from July 2021 and continued on the downward trajectory until March 2022. In FY22, the bounce rate by value was 25.88 per cent and in volume terms it was 34.75 per cent.

Experts have raised concern that stress in the system may rise because of the rate hikes that the monetary policy committee may undertake in the coming months to bring down inflation. And if stress rises, the bounce rate may also inch up.