Delinquency rates are on the rise for some segments of consumer credit — home loans, credit cards and Loans Against Properties (LAP). This rise is more pronounced for LAP pool, which increased 73 basis points (bps) year-over-year to 3.03 per cent in September 2018 (CYQ3 2018). Home loans rose 22bps to 1.73 per cent and credit cards 28 bps rise (1.78 per cent).
The rise in LAP balance-level delinquency rates is significant due to much larger average balances for this type of loan. Lenders, who are active in this segment, need to increase vigil for repayment of the LAP portfolio.
LAP, which constitute 1.6 million accounts, increased by 33 per cent in the last year. While the number of these loans in the marketplace is much smaller than that of cards and personal loans, the average balance of these accounts makes this product significant in the retail lending landscape.
While India continues to be on the path of growth, lenders must judiciously monitor their risk management processes. Lenders must now determine if the rapid demand for these loans, which are an excellent revenue generator, outweighs the recent delinquency increases.
*Delinquency rates = loans remaining 90 days past due
Source: Quarterly overview of consumer credit trends by TransUnion CIBIL for Q3
Figures for calendar year 2018