The novel coronavirus is now causing a pandemic situation around the world. It affects almost all sectors of the economy.Coming to the service sector especially Banks and NBFC’s are finding new strategies to overcome the challenge of recovering retail loans.
Almost all the Banks and NBFC’s are extending loan repayment periods because due to lockdown many credible borrowers have failed to pay the EMI.
Banks like the SBI is has tied up with the postal department to touch with the country’s huge customer base.
They are also looking forward to redirecting its 60000 business correspondents for the collection of farm loans, opening accounts, remittances, and other banking operations to expand their functions in normal.
Bajaj Finance one of the largest NBFC’s to increase their collection capacity. Due to the lockdown and incapacity of customers to pay back cash leads to increase in bounce rate in Banks and NBFC’s from an average of 19% in January, February and march to 86% in April and May.
Another fact is that reports said customers who have taken digital personal loans (credit card holders) are on the verge of the high-risk category. credit scoring firms like CRISIL, ONICRA, CARE are caution Fintech, NBFC’s have exposure to mass market segments to be careful while giving loans because there is a huge drop in income in customers ’ so the chance of paying back the loan is risky.
Banks and NBFC’s are looking for alternatives to gear up for the largest loan collection challenge faced by them as a result of COVID 19.
Report by brokerage firm Sanford C Bernstein says that feedback from various correspondents indicate that bounce rate will increase to 20%.
But at the same time banks will face the toughest year in terms of the loan and bounce of loan growth is difficult at least in FY21.
Personal loan category has shrinked by 2.46% and this is why credit rating agencies warned Banks and NBFC’s that the chance of bad debt is high in this period. The customer’s income level predominantly decreased due to lack of Job. Most of the people are not in a position to buy in this period and this will lead to a decline in spending which in turn will lead to a drop in personal loans.