Retail Loan Inquiries Improve + Delinquencies at FINTECH & NBFCS – CIBIL

In the COVID-19 pandemic times, retail credit inquiry volumes in October 2020 were 81% of last year October levels. Enquiry volumes have improved in home loans as well as Loan Against Properties (LAP). Auto and 2W loans have also seen rebound in volumes due to shift in consumer preferences. Personal loan volumes are yet to rebound impacted by fintechs-driven growth during the pre-Covid time. State owned PSU banks have been the earliest to recommence lending followed by private banks. NBFCs have seen much slower recovery. Further, semi-urban and rural have seen better rebound. For Sep 2020, PSU banks inquiry volumes are at 1.2X yoy whereas private banks are at ~0.9X and NBFCs at 0.6X. Although slow initially, credit cards are now showing better traction. PSU banks have shown better growth pick-up compared to private banks.

Delinquency Trends 90+ overdue loans have risen to 3.7% in July 2020, compared to 3.4% at April and 3.5% a year back. Among product segments, rise is sharpest in LAP (4.5% vs 3.5% yoy), followed by credit cards (2.2% vs 1.8%). Within lender categories, public and private banks are relatively stable while NBFCs and fintech have seen highest rise in 90+ overdue because of customer mix which is lower bureau scores. Another key delinquency trend is improved collections in the early bucket delinquencies (30-50 dpd) as measured by roll-back and cure rates in the segments like home loans and personal loans. This trend is helped by heightened focus on collections by NBFCs and fintechs.

Share of near-prime and sub-prime customers have increased by 3% yoy to 43% as of Sep 2020. Further, prime and prime plus category borrowers have witnessed higher propensity of score downgrades over the last couple of years. However, the delinquency picture is still unclear due to lagged effect of economic slowdown, relief programs and shift in payment priorities of consumers.

Decline in new-to-credit origination The Share of new-to-credit volumes (as of July) have
declined across the board for all segments. The decline is most stark in personal loans (7% vs 22% a year back), likely to due to supply-side issues from fintechs and NBFCs. Home loans and LAP have seen a fall in origination ticket sizes, whereas autos, personal loans and two-wheelers have seen a rise. One of the key drivers to key size trends is lack of supply from fintechs and NBFC.

With Inputs from Abhay Kelkar, Vice President, Research & Consulting, TU CIBIL

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