New Delhi: Banks have increasingly become cautious in providing smaller loans of less than Rs 50,000 to new-to-credit customers, or those who have no prior credit history, according to a report by TransUnion CIBIL.
The approval rates for these consumers have reduced from 34% and 28% in March 2020 and 2021, respectively, to 23% in the quarter ended March 2023, said the latest edition of the TransUnion CIBIL Credit Market Indicator (CMI) report.
According to moneycontrol, which cited this report, unsecured credit portfolios continue to scale up, backed by small-ticket loans. However, demand for home loans has decreased.
These small-ticket personal loans comprises 2% of all personal loans, Mint reported, citing the TransUnion CIBIL report.
The number of defaulters increased to 32.9% in the personal loans segment as on April 21, 2023, compared with 31.4% over a year earlier, moneycontrol noted.
Yes Bank and Kotak Mahindra Bank have reported higher delinquencies compared to last year. ICICI Bank is seeing the most distress in the below Rs 50,000 loan segment, the Times of India reported.
This is happening due to a number of factors including the rising cost of living, job losses, and the economic slowdown, the report added, citing an analyst.
As per Mint, ICICI Bank and Bajaj Finance are closely monitoring this segment.
As far as our portfolio is concerned, we have a very minimal presence in the smaller ticket size segment. But we will continue to monitor this as we go along,” Anindya Banerjee, chief financial officer at ICICI Bank, told analysts on 21 October, per Mint.
However, consumption might be impacted if people stopped getting these loans, Madan Sabnavis, chief economist of Bank of Baroda, told the newspaper. In such a case, “people will look for other avenues, some much costlier than bank credit,” he added.
As of August, total personal loans or “other personal loans” as classified by the Reserve Bank of India (RBI) stood at Rs 12.2 trillion, up 26% from a year ago, the business daily reported.