Payment practices report

June 2020

The Payment Practices Barometer survey was completed by businesses in India during March 2020. The first case of COVID-19 in the country was reported at the end of January, and since then India has been acting on an escalation of the contagion, putting in place measures to contain the spread of the virus.

Arun Soundarajan,

Country Manager for India commented on the report

The outbreak of the coronavirus pandemic and the consequent supply disruptions from China have significantly hurt Indian industries that are heavily dependent on imports. The virus containment measures that severely affected domestic demand are expected to cause a contraction of household consumption growth over the coming months. This adds to an expected decline of both investment and industrial construction, amid forecasts of a significant decrease in exports.

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

Reflecting on all the challenges posed to the country’s economic performance, businesses polled in India expressed concern over their short-term financing flexibility and working capital cycle over the coming months.


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 three-fold 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.

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