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Credit card delinquencies on the rise despite rebound in inquiries, says CIBIL

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Despite a revival in economic activity in the last few months, defaults in credit cards have been inching upwards and are expected to grow in the coming months, according to a report by TransUnion CIBIL. In November 2020, inquires for credit cards grew to 91.5% of the previous years’ levels indicating a revival in consumption activity, but this has been accompanied by a rise in delinquencies which reflects the wider economic slowdown, salary cuts and job losses caused by the pandemic.

“As with most major credit markets around the world, retail credit products have generally experienced an increase in serious delinquencies. In India, the delinquency picture is complicated and will take time to emerge due to the lagged effect of financial conditions, relief programs supported by lenders, and shifts in the payment priorities of consumers,” the report says. It added that there is an increase in risk-aversion among lenders as the number of consumers that have access to credit has fallen to 5.6% in August 2020 from 21.8% in August 2019.

As a credit score company, CIBIL defines delinquencies or defaults if the borrower has not paid their loan instalment for 90 consecutive days. The 90 days past due (DPD) delinquency rate for private banks improved to 1.07% as of August 2020 compared to 1.17% in the previous year. For government-owned banks, the 90 DPD rate stood at 2.8% in August 2020 compared to 3.08% in the previous year, whereas for non-banking financial companies (NBFCs) the 90 DPD rate grew to 5.08% in August 2020 compared to 4.59%.

“With financial relief programs continuing to help large numbers of Indian consumers, we don’t know the full extent of the impact on delinquencies yet. Although there may be a lag in the true volume of borrowers who fall delinquent, many lenders are hopeful that the impact will be less severe than may have been initially expected with the support from government and lender relief programs,” says Abhay Kelkar, vice president of research and consulting, TransUnion CIBIL.

Credit Cards

  • Fresh credit card origination is down by 49.9% in August 2020 compared to the previous year
  • 90 DPD increased to 2.32% in August 2020 from 1.81% in August 2019
  • 30 DPD increased to 7.56% in August 2020 from 4.9% in August 2019

Loans Against Property

  • Fresh origination of LAP loans are down by 30.4% in August 2020 compared to the previous year
  • 90 DPD grew to 3.96% in August 2020 from 3.62% in August 2019
  • 30 DPD stood at 6.78% in August 2020 down from 8.46% in August 2019

Personal Loans

  • Fresh personal loans origination is down by 42.2% in August 2020 compared to the previous year
  • 90 DPD stood at 0.65% in August 2020 down from 0.66% in August 2019
  • 30 DPD fell to 1.98% in August 2020 from 2.28% in August 2019

Auto Loans

  • Fresh auto loans origination are down by 24% in August 2020 compared to the previous year
  • 90 DPD fell to 2.91% in August 2020 from 3.13% in August 2019
  • 30 DPD stood at 5.83% in August 2020 down from 7.97% in August 2019

Home Loans

  • Fresh home loan origination is down by 16% in August 2020 compared to the previous year
  • 90 DPD grew to 1.99% in August 2020 from 1.90% in August 2019
  • 30 DPD stood at 3.86% in August 2020 down from 5.53% in August 2019

 

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