Auto-debit bounce rates for the month of August in value terms are at the lowest level they have been since the pandemic began. Bounce rates show the auto-debit transactions that did not clear. These are captured by the National Automated Clearing House or NACH debit platform—which processes recurring payments like EMIs—which is the largest chunk, and utility bill payments, insurance premiums etc.
The latest data from the National Payments Corporation of India (NPCI) shows that bounce rates stood at 33 percent by volume and 26.8 percent by value in August. These are even better than the levels seen during January-March 2021 which was the best quarter last year in terms of recovery for the economy and overall performance for the financials. This is in line with the trend report by banks, which have seen better recoveries since July and August after the COVID-19 second wave.
While this is encouraging data, bounce rates are still not at the levels we had pre-Covid. So transaction failures still remain high. The average bounce rate for the month of August in pre-Covid years between 2017-19 was around 24 percent by volume and 20 percent by value. So the current rates are still 700-800 bps higher, which is a reflection of the stress in the system.
There are some limitations to this data, however, it cannot be completely extrapolated to actual stress on banks’ books. The NACH debit is only one form of payment, does not factor in repayments by cash, cheque etc. But it acts as a good proxy to gauge the retail stress in the system.