Lenders spot green shoots in credit biz
FRESH DEMAND Lenders see a pickup in disbursement of home loans, personal loans, top-up on existing MSME loans
Retail loan demand snuffed out by the coronavirus lockdown is beginning to show signs of life with bankers reporting loan applications and disbursals in areas where curbs have been eased.
Housing Development Finance Corp. Ltd (HDFC) said it is seeing home loan disbursements rising by the day, although the figures are not comparable to the previous year. The mortgage lender has spotted the trend across cities, barring Mumbai and Delhi, the two big markets where restrictions continue.
“We have started seeing a little bit of traction. Old customers have approached to disburse the sanctioned loans and some who had applied during the lockdown have also started getting (loans) disbursed wherever registration has opened up,” said Renu Karnad, vice-chairman and chief executive officer of HDFC. “There is a lot of interest in cities like Bangalore and Hyderabad, as we see more people start filling up applications especially in the middle income and affordable housing segments,” she added.
State-run Union Bank of India said it has started seeing an increase in demand for top-up loans from existing home loan borrowers, as they use these funds for consumption purposes.
“We have seen a pick-up in documentation and disbursement of pre-approved loans for top-up loans on existing housing loans and micro, small and medium enterprises (MSME) loans. These loans are capped at ₹5 lakh payable at an interest rate of 8-9%,” said Rajkiran Rao, chief executive and managing director.
State Bank of India, the country’s largest lender, said it has witnessed a jump in pre-approved personal loans in April and May. These are loans given to salaried customers through the bank’s mobile app Yono.
According to a senior bank official, the pickup in personal loans has been better than in the previous financial year. “Everybody wants to get some liquidity.
These are loans given to salaried customers where there is some kind of understanding with employers and some clarity of salary over the last six months,” he said.
IDFC First Bank, where consumer loans make up nearly 17.5% of total loan book, has reported a pickup in loans. “April was not a good month in terms of credit growth due to lockdown. After the recent lifting of lockdown in some states, we were pleasantly surprised to see consumption coming back. When the lockdown was lifted, there was demand for consumption items and durables,” said V Vaidyanathan, chief executive officer and managing director of IDFC First Bank.
Rating agency Crisil Ltd on Tuesday said the Indian economy may contract by 5% this fiscal, slashing its growth outlook for the year from 1.8% in April, holding that India’s economic package is unlikely to boost the economy in the short run and the partial lockdown continues to be a hindrance to normal economic activity.
Crisil said the recession in the current year could be India’s fourth since Independence and perhaps its worst. “In the past 69 years, India has seen a recession only thrice – as per available data – in fiscals 1958, 1966 and 1980. The reason was the same each time – a monsoon shock that hit agriculture, then a sizeable part of the economy,” it said.
The government has extended the lockdown three times till May 31 to deal with the rising number of coronavirus cases, curtailing economic activity severely.
“We believe successive lockdowns have a non-linear and multiplicative effect on the economy—a two-month lockdown will be more than twice as debilitating as a one-month imposition, as buffers keep eroding. Partial relaxations continue to be a hindrance to supply chains, transportation and logistics,” it added.
Crisil added that the economy is likely to contract 25% during the first quarter. “The first quarter will be the worst affected. June is unlikely to see major relaxations. Jobs and incomes will see extended losses as these sectors are large employers,” the rating agency said.