Financial Stability Report: Consumer Credit Portfolio Of NBFCs Deteriorates

Amid a sharp fall in consumption, non-bank lenders saw a spike in consumer loan delinquencies.

While bad loans remained stable for public and private lenders in auto and home loan categories, delinquencies rose in loans against property across lenders, according to the Reserve Bank of India’s Financial Stability Report.

Higher delinquencies in consumer credit portfolios of non-bank lenders and housing financiers, when compared to scheduled commercial banks, is a continuation of an earlier trend, the report said.

Bad loans in the auto segment rose to 4.7 percent for NBFCs as of June 2019 from 4.4 percent in March. For private banks, delinquencies in the category remained at 0.9 percent in June and for public sector banks at 2.6 percent, according to the report. That came despite slowing consumer credit as consumption growth fell in the quarter ended June.

Housing financiers’ portfolio showed a disproportionate increase in delinquencies to 1.8 percent as of June from 1.5 percent in March. Private banks’ bad loans in the category remained unchanged at 0.7 percent and for public sector lenders, it improved to 1.8 percent as of June from 2 percent in March. “A relative slowdown is also seen in home loan origination volumes reflecting the generally soft activity in the real estate sector,” the report said.

Loans against property saw the highest increase in bad loans, with NBFCs and state-run banks being the worst affected. Delinquencies in the category rose to 5.2 percent in June from 4.8 percent in March for NBFCs, and to 6.5 percent from 5.7 percent for public banks. Housing financiers’ bad loans, too, rose from 2.1 percent to 2.6 percent.

As a precautionary measure, fresh lending against property by state-run banks and non-bank lenders declined sharply in the quarter ended June even as private banks lent to higher-risk customers, the report said.

Meanwhile, personal loans continued to show healthy growth in the quarter ended June, led by non-bank lenders. Delinquencies for the segment remained stable for NBFCs and private banks, with public banks showing a modest downtick.