Retail NPLs on the Rise since December 2018
The next cycle of non-performing bank assets (NPAs) could come from retail lending as the economy slows and borrowers are unable to protect their jobs.
As banks and NBFCs boost retail lending activities like home, auto and personal loans, consumer segment APNs or bad debts are increasing. This could lead to the next APM cycle if lenders don’t put in place strong risk management techniques to cap losses, experts say. A loan where principal or interest is not paid for 90 days is called an NPA.
“The Indian credit market has experienced strong growth over the past six quarters. Risk indicators have shown an upward bias, but remain in the range,” said Ashish Singhal, Managing Director of Experian Credit Information Company of India.
Singhal, whose company has access to all loans to individuals and businesses, said the growth in the market was driven by unsecured loans such as personal and consumer durable loans, while the growth in secured loans such as home and auto loans slowed down. in the fourth quarter of fiscal 2019.
“Recent events such as the downturn in the economy, autos, manufacturing and real estate could dampen credit growth and we need to watch the risks more closely,” he said.
Experian data shows APNs for all retail segments are on the rise. At the end of May 2019, banks and NBFCs had outstanding mortgage loans of Rs 18,553.053 crore. Gross NPAs on home loans stood at Rs 36,945 crore in December 2018, which reached Rs 39,033 crore and Rs 40,431 crore at the end of May. This translates into a growth of 9% compared to December. The outstanding two-wheeler loan was Rs 58,353 crore in May. NPAs on these loans stood at Rs 5,406 in December 2018, rising to Rs 7,722 crore in May 2019, or around 42%, according to Experian data.
Unsecured loans like personal loans have also seen an increase in delinquencies, but credit cards have seen an improvement. Banks and NBFCs had disbursed Rs 44 2560 crore in personal loans. The gross NPA on this was Rs 21,540 crore in December 2018, which rose to Rs 36,723 crore in May 2019, an increase of 70%. The credit cards had outstanding loans of Rs 1,23,526 crore. The NPAs on this segment were Rs 26,207 crore in December 2018, but fell to Rs 25,103 crore in May 2019.
“The downturn is leading to job cuts leading to an increase in PADs for general personal loans for the industry. Sectors like the auto industry are not doing well either, leading to delinquencies. Far, even after the merger of Vijaya Bank and Dena Bank, ”said a senior Bank of Baroda official.
The used commercial vehicle segment is isolated for now with companies financing the depreciated value of the vehicle.
“Due to the monsoons there is usually a slight increase in APNs, but we are in the used commercial vehicle segment where the borrower is the end user. In addition to these vehicles we are financing 60-70% .% on the depreciated value of the vehicle, which doesn’t create big default problems, ”said a senior official at Shriram Transport Finance.