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Fresh home loans fall 6% in Q1 FY20 due to NBFC woes: Report
ET Realty  |  October 31, 2019

Mayur Shetty Mumbai

​​According to a report by TransUnion Cibil, funding challenges are forcing NBFCs to shift from larger-value loans to smaller-ticket personal loans, which are riskier.

 

Fresh disbursement of home loans and loans against property have fallen by 6% and 21% respectively in the quarter ended June 2019 compared to the corresponding period of the previous year due to stress in the non-banking finance company (NBFC) sector.

 

According to a report by TransUnion Cibil, funding challenges are forcing NBFCs to shift from larger-value loans to smaller-ticket personal loans, which are riskier.

 

The slowdown in long-term loans like mortgages takes longer to be visible because loan growth is calculated using the difference in the outstanding balance quarter-on-quarter. Because of their long-term nature, outstanding loans continue to grow even when disbursements fall.

 

According to the TransUnion Cibil report, fresh disbursement of home loans by banks and housing finance companies stood at Rs 1.2 lakh crore in the quarter ended June 2019, down 6% from Rs 1.28 lakh crore in the year-ago period. Loans against property disbursed during the quarter stood at Rs 30,300 crore, down 21% from the year-ago period.

 

“The NBFC liquidity crisis is becoming a serious concern, as it could have negative ramifications on wider economic activity,” said Abhay Kelkar, VP (research and consulting), TransUnion Cibil.

 

“Even though overall consumer credit delinquencies have remained largely stable through this slowdown, our data indicates that there are some stress build-ups in NBFCs. While strong lender risk management policies are always important for the health of the lending market, we find ourselves increasingly in an environment where vigilant monitoring and thoughtful strategies are essential to minimise the impact of a weakening portfolio performance,” he said.

 

NBFCs in general have been finding it difficult to raise funds in the wake of the IL&FS crisis. In the case of housing finance, the second-largest private company — DHFL — had stopped disbursing loans after a default. According to lenders, loan against property is largely availed by owners of small businesses to get cheaper credit.

 

To that extent, the slowdown in this segment reflects a reducing in SME borrowing activity. According to the report, consumer credit balances across all major credit products grew 17% year-on-year (YoY) in the quarter ended June 2019, compared to 23.5% in the same quarter of the previous year.

 

Growth in credit cards and personal loans significantly outpaced increases in auto loans, home loans and loans against property.

 

The fintech and NBFC segment continue to expand access to financing with the total number of consumers with access to credit increasing by 21.7% in the quarter during the quarter YoY in Q2 2019. Although still quite high in comparison to most major economies worldwide, this was down materially from the 26.3% jump YoY in Q2 2018.