Small ticket personal loans delinquencies shoot up in FY21, NBFCs most hit

Small ticket personal loans segment has witnessed a huge surge in asset quality stress for lenders in the pandemic-affected FY21, with NBFCs taking the maximum brunt

Small ticket personal loans (STPL) segment has witnessed a huge surge in asset quality stress for lenders in the pandemic-affected FY21, with non-bank finance companies (NBFCs) taking the maximum brunt, according to a report published on Thursday.

The delinquency levels for loans unpaid for between 30-180 days shot up to 12.7 per cent as of March 2021, as against 8.2 per cent in the year-ago period and just 4 per cent at the end of March 2019, the data published by CRIF High Mark, a credit information company, said.

Since the onset of the pandemic, concerns were raised about the personal loans portfolios because of the income generation impact in a fiscal year which saw the economy contract by 7.3 per cent. The regulator responded by initially placing a moratorium and then introduced a restructuring mechanism as well for small-ticket lending.

 

The NBFCs' delinquency levels stood at 14.8 per cent on the STPL, followed by 5.6 per cent for private sector banks, while the state-run lenders' ratio on the same was just 1.5 per cent.

The overall portfolio outstanding stood at Rs 13,600 crore with 1.46 crore active loans as of March 2021. In FY21, STPL witnessed originations of Rs 13,500 crore by value and 1.48 crore accounts by volume with average ticket size of Rs 9,100, the report said.

There is a 42 per cent decline in average ticket size of STPL from FY19 to FY21 driven by focus on small ticket loans by NBFCs, it said.

The STPL portfolio is only 4 per cent of what the bureau called as mass market segment but contributed for 62 per cent of the volume.

From an asset quality perspective, it said affordable housing loan segment showed a decline in delinquencies to 3.2 per cent along with business loans (now down to 6.9 per cent), while others like consumer durables, two-wheelers and commercial vehicles loans showed an uptick, the data showed.

Those aged under 25 or between 26 to 35 years account for a bulk of the STPL, consumer durable and two-wheeler loans, it said, hinting that other loans like business loans, affordable housing and commercial vehicles are brought by older people.