India: bleak outlook for credit risk in B2B trade

Payment Practices Barometer

  • India
  • Chemicals/Pharma,
  • Electronics/ICT,
  • Textiles

10th June 2020

Business performance and credit risk has deteriorated in all main industries in India, thus worsening the insolvency outlook this year.


Like many other economies that depend on Asian supply chains, the outbreak of the  pandemic in India has triggered severe economic shocks. In the case of India, however, these latter added to an economic slowdown that had already started last year largely caused by faltering domestic demand.

Key takeaways from the report

The vast majority of businesses in India anticipate a significant deterioration in B2B payment behaviour. Key indicators of financial stress echo this, including the year-on-year threefold increase in write-offs of uncollectable debt and doubling in average value of long-overdue invoices. In all, the majority of respondents to the survey pointed to significantly lower success rates in debt collection than last year.

Perhaps as an indicator of a reduced appetite for risk amid an expected rise in insolvencies, total value of B2B sales transacted on credit has declined compared to last year’s survey results. This is not surprising when you consider that the vast majority of businesses polled used self-insurance as a risk mitigation tool. While any risk-mitigation technique is better than none, self-insurance does little to transfer risk and can prove to be costly during a period of increased insolvencies.

Businesses in India predict an increase in reliance on bank finance in the coming months. In addition they could benefit from a strategic approach to credit management combining
several approaches including pre-credit assessment checks of all customers, discount incentives for early settlement of invoices and payment guarantees. These may be letters of credit, credit insurance and payment bonds.

Key survey findings for India

  • Decrease in B2B sales on credit reflects increase in credit risk environment
  • Significantly longer payment terms accommodate need for short-term trade
  • Most common credit risk mitigation technique in India: self-insurance
  • Write-offs of uncollectable B2B receivables three times higher than last year
  • Poor outlook for B2B customers’ payment practices
  • Dependence on bank finance expected to increase due to cash flow constraints

Interested in getting to know more?

For a complete overview of the payment practices in India and in the chemicals, ICT/electronics and textile industries in India, please download the complete report.








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