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Delinquency in consumer durable loans and two-wheeler loans has seen a rise since the outbreak of the Covid-19 pandemic in March, as per a report by credit bureau CRIF High Mark.

Default in consumer durable loans have seen a sharp increase of about 68% for 30 to 180 days payment overdue bucket between March 2020 and March 2021. Consumer durable loans are a financing option for household items, such as refrigerator, television, washing machine etc.

Two-wheeler loans default rate has increased at a relatively lower pace in the 30 to 90 days payment overdue section. However, longer duration of over 90 days has seen a 69% increase in delinquencies for the same period. Portfolio at risk (PAR) in 91-180 days period increased from 2.3% in March 2020 to 3.9% in March 2021, as per the report titled ‘How India Lends 2021’.

As opposed to these unsecured loans, delinquency in home loans across premium (loans over 75 lakh), mid-range (between 35 lakh and 75 lakh) and affordable (below 35 lakh) segments saw no significant change during the same period.

Both consumer durable and two-wheeler loans are small-ticket loans ranging from 5,000 to 1 lakh and are dominated by non-banking finance companies (NBFCs) by value and volume in the last three years. Small-ticket loans are usually targeted by NBFCs at high credit risk individuals.

Deterioration in delinquencies in consumer durable and two-wheeler segments, while delinquency quality of secured home loans remained unchanged, shows credit given out to high-risk individuals will always be more susceptible to default in case of income disruptions led by an economic slowdown or a recession.

“The credit landscape in India is ever evolving and has witnessed changing consumer preferences, shift in demand towards smaller ticket loans, ease of access to credit, increased usage of digital platforms and entry of non–traditional lenders in the ecosystem to name a few," said Navin Chandani MD and CEO, CRIF High Mark.

 

 

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