The country is in the grips of a slowdown, jobs are getting more scarce, paychequues are getting paler — but the average Indian is still rated as a safe bet for lending.
According to rating agency Credit Information Bureau India Limited (Cibil), 75% borrowers across India who have taken loans to purchase homes or cars are ‘very safe’.
If the level of non-performing assets (which fetch no return for banks) is high, this is primarily due to companies defaulting in repayment and big ticket corporate loans turning bad, say banks.
Banks have witnessed a steady increase in the level of bad assets over the last one year.
“We have not faced problems in our retail loan segment as most borrowers have been repaying as per schedule, even as there have been reduction of salaries in several cases,” Indira Padmini, general manager, retail banking and marketing, Indian Overseas Bank told HT. As per Cibil, a large number of borrowers are below the age of 35.
“We have seen no change in borrowers’ credit worthiness though the economy has slowed down.. over 80% have high scores,” Arun Thukral, managing director, Cibil, added.
However, the economic slowdown has changed customers’ spending patterns. Some 62% first-time borrowers sought to purchase a house or a car — compared to 2006, when the majority (69%) of first-time borrowers went in for unsecured loans such as personal loans or credit card spending.
“Customers are willing to reduce other spends but not on housing and owning a car,” said a senior executive at HDFC, adding that this is different from other countries.
Finance minister P Chidambaram is pushing the chiefs of public sector banks to lower interest rates on loans to push growth. At a recent press conference, he had indicated that banks are being over-cautious.