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Defaults on rise in retail loans

Credit card, loans against property segments most affected, says Cibil report

RBI rejects merchants’ demands to allow storage of customer credit card data
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RBI rejects merchants’ demands to allow storage of customer credit card data

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Mumbai: Retail credit has experienced an increase in serious delinquencies, with loans against property and credit cards being the most affected segments, a report by a credit information bureau said on Wednesday. As of August-end, the loans overdue for over 90 days in the credit card segment were 0.51 per cent up from the year-ago period at 2.32 per cent, while the same for the loans against property was 0.34 per cent up at 3.96 per cent, Transunion Cibil said. "Credit cards delinquency rates reflected the wider economic slowdown, salary cuts and job losses caused by the pandemic. Further, credit cards often have a lower payment priority, with consumers choosing to pay other credit accounts first," the bureau said.

For LAP, a product generally used by small businesses as working capital finance, delinquencies had already been on the rise prior to Covid-19. It, however, said that the delinquency picture is "complicated" and will take time to emerge as the lagged effect of financial conditions, relief programs supported by lenders, and shifts in payment priorities of consumers play out. It can be noted that the Reserve Bank had announced a moratorium on loan repayments for six months ending August 2020, under which a loan account cannot be termed as a non-performing asset (NPA) for non-payment. The central bank had later introduced a loan restructuring scheme across all categories for borrowers impacted by the pandemic.

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