Loan penalties are eased before festivals
Lenders and credit card issuers have been cautious during the moratorium period, with the Reserve Bank of India (RBI) saying borrowers who take the moratorium will not be classified as delinquents. This has made it difficult for lenders to assess applicants as well as the impact of the covid-19 pandemic on their portfolios. Now that the moratorium is over and borrowers have started repaying, credit bureaus are able to provide the required information. This made it easier for banks and NBFCs to assess applicants.
“Over the next 30 to 60 days, along with the holiday season just around the corner, we will see an increase in demand for ready as well as the ability of lenders to underwrite and deliver them, ”said Anshul Swami, Retail and Rural Products Inclusion Manager, RBL Bank.
According to bankers, although the rise in demand is not the same as during the holiday season last year, it could approach the level of February, before the pandemic breaks out.
FLIGHT FOR SAFETY
Lenders rely heavily on credit reporting bureaus to assess the creditworthiness of borrowers. But the credit bureaus ignored non-payment during the moratorium period when calculating credit scores.
The extension of the moratorium from three to six months has added to the uncertainty. “None of us knew the impact of a black swan event like the covid-19 pandemic. When in doubt, the flight to safety is the typical response. With the credit bureaus unable to provide the required data, lenders have taken a cautious approach, “said Jasmeet Wadhwa, Executive Director and Business Leader, Consumer Credit, DBS Bank India. This uncertainty is now coming to an end. .
resumption of demand
Demand for loans is picking up in some segments. Recently, HDFC Ltd informed the exchange that loan disbursements in the September quarter were at 95% of the level of the corresponding quarter of last year (read bit.ly/hdfcbiz). Demand also picked up in the two-wheeler segment.
Credit card applications are also on the rise. “We are seeing an increase in demand for credit cards as the holidays approach, and there are a lot of special offers on the cards during this time,” said Adhil Shetty, Founder and CEO of BankBazaar.com.
The application for personal loans may take some time to reach pre-covid-19 levels. “We saw the growth of personal loans in multiples initially. When we started our business after the lockdown, we struggled to define the top 10% business. But the next 20% and 30% happened within 30 days, ”said Adheer Dhar, head of personal loans and fintech at Clix Capital.
“My feeling is that demand should reach around 70-75% of pre-covid-19 levels during the holiday season and then decline. It is only probably by next March that we will see a full recovery and reach pre-covid-19 levels, ”he added.
According to bankers, aggregate demand for personal loans is about 60 to 70% of what it was before the outbreak of the pandemic. But the conversion rates are lower.
Bankers expect some increase in demand over the next two months, but not as strong as last year. During the festival season last year, for example, RBL Bank’s card spending increased by around 28%. “While there is certainly an upward movement this time around as well, given that there is always additional demand during this time, but in absolute terms I don’t think the growth will be as important because the clients are slightly cautious and think carefully before they become discretionary spending, ”Swami says.
During the moratorium, lenders focused on existing customers. They were not able to thoroughly assess the demands of new borrowers due to lack of credit information. For existing borrowers, they could rely on their repayment history. Banks were also able to focus on existing customers who had their savings, salary, or checking accounts with them and could easily assess their cash flow.
Now that the situation has changed, lenders have started looking for new clients. “Most of the lenders are trying to get back to normal and have started looking for new clients,” Dhar said.
While the lenders worked with limited staff in the field during the lockdown, the staff situation has not improved much as many field officials have not yet returned from their hometowns and public transport is not yet available. are not fully functional.
However, with the establishment of regulations by RBI for the use of the technology, onboarding new customers will not be difficult despite the understaffing.
“Whether the client is old or new, lender representatives no longer need to meet with them for most of the paperwork. Technology has become a leveler. It is the same risk analysis that would not be used to assess old or new clients and process their requests. The integration, for example, can be done using KYC video (know your customer), ”said Shetty.
If you are looking for a loan, especially a home loan that helps you build an asset, you may no longer have to worry about rejection due to the lender’s strict assessment criteria.
Never miss a story! Stay connected and informed with Mint. Download our app now !!