Personal Loans gets tougher

Covid 19 crisis in India has left the credit sector struggling with companies backing out on Loan repayment utilizing the RBI’s provision of 6 month moratorium. The case is the same with Retail loans such as Auto Loans, Credit Cards, Consumer Durable loans and almost every sector. There is mounting pressure due to decreased revenue and there is an emergency need for capital infusion to the sector.

Personal loans are the most preferred unsecured loans which are mostly availed by salaried employees. With existing loans in moratorium and employment instability, Banks and NBFCs are tightening their credit policies and customer selection norms to avoid chances of future defaults. Loan approval rates have been decreased in almost all categories.

The inability of some consumers to pay their debts after the moratorium period ends is likely to adversely impact their scores, and consequently the default probability may see a rise. For other personal loans where there is physical collection involved, adherence to social distancing norms and limited field travel may impact overall lender collection efficiency, increasing roll rates, the report observed.

Source: Economic Times