New Delhi, Nov 18 (IANS) Data and management comments across NBFCs/banks suggest increasing delinquencies in unsecured loans, particularly in small portfolio size personal loans (STPL), below Rs 50,000, and loans raised through FinTech partnerships, said foreign broker Nomura. in a report. About 25 percent of incremental origination by volume over the past two years came from small bill personal loans (STPL), but it accounted for only 2.5 percent of the PL system by value.
Furthermore, In the quarter of June 2023, 51 percent of borrowers who took out a small ticket personal loan already had more than four credit products at the time of taking another new loan (17 percent in the quarter of June 2019).
An increase in delinquencies in STPL is unlikely to create problems at the system level. However, it should adversely impact some medium/small NBFCs, which have grown rapidly in this segment over the past few years and have significant exposure to unsecured loans.
Around 25-30 per cent of incremental loan growth for NBFCs during FY22-2Q24 came from unsecured loans and therefore rising delinquencies should impact NBFC loan growth first, Nomura said.
Further, if stress continues to rise in unsecured loans, the credit cost trajectory for NBFCs in FY25 would be higher than historical trends and may negate the expected positive impact of repo rates on the cost of funds, it added.
In line with earlier quarters, NBFCs continued to grow faster than systems / banks in unsecured loans in Q2 due to elevated competition in secured segments. During FY22 to Q2 ’24, unsecured loans of NBFCs grew 75 percent against 45 percent for the overall system.
The total AUM of these 13 NBFCs registered a growth of 24 per cent indeed in Q2 ’24 (37 per cent in FY22-Q2 ’24), of which the PL portfolio grew at a faster rate of 51 per cent indeed in Q2 ’24. .
— IANS
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