Credit defaults on consumer durables and two-wheelers are on the rise

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Delinquency on durable consumer loans and two-wheeler loans has increased since the outbreak of the Covid-19 pandemic in March, according to a report by the credit bureau CRIF High Mark.

Durable consumer loan defaults saw a sharp increase of around 68% for late payments of 30 to 180 days between March 2020 and March 2021. Durable consumer loans are a financing option for household items , such as refrigerator, television, washing machine, etc.

The two-wheeler loan default rate increased at a relatively slower rate in the 30-90 day late payment section. However, a longer term of over 90 days saw a 69% increase in defaults for the same period. The portfolio at risk (PAR) over a period of 91 to 180 days has increased from 2.3% in March 2020 to 3.9% in March 2021, according to the report titled ‘How India Lends 2021’.

Unlike these unsecured loans, delinquency premium home loans (loans on ??75 lakh), midrange (between ??35 lakh and ??75 lakh) and affordable (below ??35 lakh) segments saw no significant change during the same period.

Durable consumer loans and two-wheelers are low-cost loans ranging from ??5,000 to ??1 lakh and are dominated by non-bank financial corporations (NBFCs) in value and volume for the past three years. Low cost loans are generally targeted by NBFCs on people with high credit risk.

The deterioration of defaults in the consumer durables and two-wheeler segments, while the quality of defaults on secured mortgage loans has remained unchanged, shows that loans to high-risk people will always be more likely. to default in the event of a disruption in income due to an economic downturn or recession.

“The credit landscape in India is constantly changing and has seen a shift in consumer preferences, a shift in demand towards smaller loans, ease of access to credit, increased use of digital platforms and entry. of non-traditional lenders in the ecosystem to name a few, ”said Navin Chandani MD and CEO of CRIF High Mark.

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