Retail
credit has experienced an increase
in serious
delinquencies, with
loans
against
property and
credit cards being the most affected
segments, a report by a
credit information bureau said on Wednesday.
As of August-end, the
loans overdue for over 90 days
in the
credit
card segment were 0.51 per cent up from the year-ago period at 2.32 per cent, while the same for the
loans
against
property was 0.34 per cent up at 3.96 per cent, Transunion Cibil said.
”
Credit cards delinquency rates reflected the wider economic slowdown, salary cuts and job losses caused by the pandemic. Further,
credit cards often have a lower payment priority, with consumers choosing to pay other
credit accounts first,” the bureau said.
For LAP, a product generally used by small businesses as working capital finance,
delinquencies had already been on the rise prior to COVID-19.
It, however, said that the delinquency picture is “complicated” and will take time to emerge as the lagged effect of financial conditions, relief programs supported by lenders, and shifts
in payment priorities of consumers play out.
It can be noted that the Reserve Bank had announced a moratorium on loan repayments for six months ending August 2020, under which a loan account cannot be termed as a non-performing asset (NPA) for non-payment.
The central bank had later introduced a loan restructuring scheme across all categories for borrowers impacted by the pandemic. However, bankers have been saying that there has not been a high amount of requests for loan recasts.
The bureau said
in the case of auto
loans and personal loan
segments, there has been an improvement from a delinquency perspective.
From a
lending institution perspective,
retail
loans extended by non-bank finance companies (NBFCs), which typically take riskier loan bets, reported a 0.49 per cent increase
in
delinquencies
in August as compared with the year-ago period, while the same improved 0.28 per cent for state-run lenders and 0.10 per cent for their private sector counterparts.
It said the shape of recovery
in
retail–
credit markets will be very much influenced by the ability to contain the spread of the pandemic along with consumer and lender resiliency.
Retail advances growth for the system slowed to 2.5 per cent
in August (compared with the year-ago period of August 2019), as
against 8.9 per cent
in May this year and 16.7 per cent
in February, it said.
The deceleration
in balances growth is more pronounced for private banks and NBFCs, it said.
Demand for
retail
credit has been growing lately and
in November,
retail
credit demand (as measured by inquiry volumes) was back to almost 93 per cent of the levels observed
in November 2019, it said.
PSU banks saw the biggest rebound
in inquiries
in the unlock phase, as they were early
in recommencing operations than their peers, while private banks have witnessed a positive growth
in inquiry volumes for the first time
in November 2020 since February, it said.
