Tightening liquidity scenario in the country has led to Reliance Consumer Finance, a 100 per cent subsidiary of Reliance Capital, to end fresh loans. The situation is similar wherein most non-banking finance companies (NBFCs), including India Bull Financial Services, Shriram Transport Finance, Mahindra Finance, DBS Chola Financial Services, have slowed down lending.
“Our focus in consumer finance business has always been on the quality of credit that we sourced and not just growth,” Sam Ghosh, CEO, Reliance Capital, said. “However, in light of the prevailing market conditions, we deliberately slowed down the growth till September 2008. In fact, beginning October, we have put on hold further disbursals and will review resumption as the situation in the credit markets improve.”
Reliance has reduced its personal loans portfolio to 13 per cent of the total loan book against 15 per cent at the end of June 2008. “Wherever we had made commitments earlier, we are lending. However, we have stopped fresh disbursals. If the borrowing rate is 16 per cent, it doesn’t make sense for us to lend at 21 per cent as we should have a net interest margin of 4.5 to 5 per cent to survive,” Ghosh added.
“As liquidity is tight, we are not looking at growing the balance sheet,” Gagan Banga, CEO, India Bulls Financial Services, said. “The credit growth for the industry has slowed down to just 9 per cent in the last 15 days. We disbursed around Rs 1,500 crore in the quarter ended September 30, which was lower than the Rs 2,000 crore disbursements in every quarter. We are taking stock of the liquidity situation and will plan the move in the coming months.”
According to sources, DBS Cholamandalam has not disbursed personal loans in the last two months. However N Srinivasan, group director, finance, Murugappa Group, said, “It is not correct to say that we have stopped fresh disbursements, we have slowed down.”