In November 2020, retail credit demand, measured by inquiry volumes, was at 93% of the levels seen in November 2019, according to the report.
Driven by low interest rates and stamp duty cuts, home loan inquiries are on the rise. However, overall demand for retail credit remains below the levels seen a year ago, credit bureau TransUnion Cibil said in a report. In November 2020, retail credit demand, measured by inquiry volumes, was at 93% of the levels seen in November 2019, according to the report.
Mortgage loan inquiry volumes increased 9.1% year-on-year (YoY) in November 2020. By contrast, personal loan inquiry volumes fell 43.1% year-on-year as risk appetite declined. lenders. While in the pre-Covid era, fintechs and non-bank financial corporations (NBFCs) had driven much of the growth in this category, NBFCs experienced a 69.7% year-over-year decline in November 2020 as they stopped trading. Offer personal loans to the highest risk borrowers. Fintech query volumes also decreased 10.2% year-on-year over the same period.
Abhay Kelkar, vice president of research and consulting at TransUnion Cibil, said that as businesses and consumers adjust to the difficult situation, there is positive momentum in credit demand since the initial closing earlier in the year. “It is encouraging to see renewed demand for credit as it indicates that consumer confidence and willingness to borrow to finance higher value purchases are on the rise,” he said.
At the same time, lenders’ appetite for lending to small borrowers has certainly suffered, and origination, as measured by new account openings, fell across all major retail credit categories year-on-year in August 2020. The report cited data. from the Center for Monitoring the Indian Economy (CMIE) to state that the significant drop in origination volumes across all major retail credit categories was driven by a decline in consumer demand during that period, as well as appetite at the risk of the lenders. Kelkar said that when lockdown restrictions began to ease, there was a marked shift in lenders’ risk strategies, with some returning to the market much faster than others. “Public sector banks were among the first and first to see a resurgence in demand. Similarly, the lenders’ appetite for risk has changed, and some providers have stopped granting new loans altogether, ”he added.
Retail credit products have generally experienced an increase in severe delinquency, defined as past due balances of 90 days or more. The asset quality landscape is complicated and will take time to emerge due to the lagged effect of financial conditions, assistance programs supported by lenders and changes in consumer payment priorities, according to the report.
Among the major retail credit products, credit cards and mortgage loans (LAPs) recorded the largest year-on-year increase in serious delinquency rates at the balance level in August 2020, rising 51 and 34 basis points (bp ), respectively. By contrast, auto loans experienced a year-on-year improvement in delinquency rates in August 2020, with a reduction of 23 bps to 2.91%. Consumers may be prioritizing auto loan payments to preserve the utility that personal transportation provides, according to the report. Personal loans showed a minimal improvement of one basis point, driven by a drastic reduction in the risk appetite of lenders and the creation of new accounts.
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