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- The highest risk of default in education loan, but the problem is chronic
- Personal loans have the lowest risk, but the reason is moratorium
Kovid-19 caused great turmoil in the personal and professional lives of the people. They had to take a loan to fulfill their responsibilities and they got stuck in it badly. Retail loan means loan taken by common people has reached the level of 40 lakh crore rupees. With this, the NPA of banks (loans for which principal or interest is not repaid for 90 days) is also increasing. The maximum risk of default is in education loans, but this problem is not present today. Personal loans have the lowest risk, but the reason is moratorium.
Highest loan home, portfolio of Rs 21,78,422 crore
Let us see which loan burden is most on the common people. According to the country’s largest credit bureau CRIF High Mark, people have taken the maximum loan home of Rs 21,78,422 crore. This figure is of 31 October 2020. This was followed by personal loan (Rs 5,36,035 crore), auto loan (4,26,506 crore), gold loan (3,37,860 crore), credit card (1,62,003 crore), education loan (1,02,742 crore) and consumer loan (47,582 crore).
Highest in default risk education loan, lowest in gold loan
As far as the default risk is concerned, the highest (12.6%) risk is due to education loan. According to the data, it is followed by credit card (5.3%), auto loan (4%), home loan (2.6%), consumer loan (2.1%), personal loan (0.8%) and gold loan (0.7%). is. The RBI also said in its recent financial stability report that the NPA of banks could reach 14% by September 2021.
Default in personal loans has been less due to Moratorium
You may find it strange to see these figures that the highest risk of default is in education loan, while the risk of becoming NPA of personal loan is just 0.8%. The reason for this is that due to the order of the Supreme Court, banks are not declaring the default in personal loans as NPA.
In fact, most of the borrowers had taken the moratorium for personal and credit card repair. In such a situation, the CRIF high mark data provides a clearer picture of the situation, according to which the default on credit card dues reached 5.3% in October 2020 from 1.5% in March 2019.
Kovid faces the highest risk of default in retail loans
Madan Sabnavis, chief economist at CARE Ratings, says, “The biggest risk of default for banks is in retail loans.” Many people have become unemployed or their salary has decreased, so their risk of default has increased in the coming quarters. However public sector banks have realized this situation, as some of their retail loans have started defaulting. He is seen to have the highest risk of default in SME, toewheeler, personal and affordable loan.
Focus on retail loan increased after IL&FS debt crisis
According to experts, the delay in repayment of loan is due to loss of job and employment, reduction in salary and the effect of slowdown. If you look at the situation from the perspective of lenders, the reason for this has been the focus on the retail loans of banks after the IL&FS debt crisis. The borrowers borrowed more due to lower interest rates. Apart from these, due to e-commerce companies hitting entry in small cities, there was also increase in purchases on credit.
Debt settlement companies helping banks and borrowers
The good thing is that loan payments have been increasing for some time but have not reached the pre-Kovid level. Actually, self-employed and low-income people are having difficulty in repaying loans. But that is not the solution. Debt settlement companies like Freedom of Gurugram are getting banks to deal with borrowers.
Freed’s founder explains that banks are also settling with some hair cuts (leaving some of the balance). According to him, the biggest problem is in the payment of personal loans and credit card loans. Whatever is found from the bank defaulting loans, they are busy in getting the money back.
Interest and fees income increasing with loan recovery
According to top executives of some big private banks, their banks are standing firm in the current debt crisis. He is well provisioned. There is a massive loan recovery here. Interest and fee income are increasing. The ED of a large private bank said that adequate provisioning has been made for loans to be written off. Due to the strong trend of recovery, a large part of provisioning will return to the loanable fund in the fourth quarter.