Lenders Wary About New To Credit The Customers, Says Cibil Report

Lenders seem to be turning wary about serving the New To Credit (NTC) customers and showing more preference towards existing borrowers, a report said on Wednesday.

Demand for credit continues to accelerate even after the end of the festive season but seems to be driven more by consumption and the riskier personal loans, and is not resulting in asset creation, credit rating agency Transunion Cibil said in the report. For the three months ended November 2021, the share of NTC in origination volume slid to 14 per cent of customers from 16 per cent in the year-ago period and 17 per cent before the start of the pandemic in 2019, it said. "Lenders are approaching the New To Credit (NTC) consumer segment with caution," the report said.

Looking at the approval rates for loans, the NTC segment saw a decline to 27 per cent from the 30 per cent level in the year-ago period while the existing to credit segment also witnessed a slide to 29 per cent from 31 per cent in the year-ago period. The credit demand continued to grow with the inquiry volumes for consumer durable loans growing 97 per cent and personal loans up 80 per cent, the report said. Early data suggest the increase in demand has continued past the festive period and into the new year as well, with the inquiry volumes up 33 per cent in January 2022 compared to a year-on-year decline of 10 per cent, it said.

It can be noted that the consumption loans segment includes the riskier products of personal loans and credit cards, and also consumer durable buys such as mobile phones which are depreciating assets. From a loan quality perspective, the two wheeler loans showed a spike in asset quality issues with a 1.40 per cent jump in loans unpaid for over 90 days to 3.64 per cent while credit card showed a 0.77 per cent improvement to 2.22 per cent, the data showed.

The collection efficiencies for lenders are better than the year-ago period, but continue being below the pre-pandemic levels, it said. The Credit Market Indicator (CMI) improved to 91 points for the three months ended November 2021, up 4 points from its August 2021 levels, it said, adding that it is indicating a stability in retail credit market now.

(PTI)