As the pandemic situation has already led banks both from the private and public space to set their Covid 19-related provisioning, they are even harder on their lending terms now than before. In fact, the huge supply and demand disruption amid the pandemic crisis has worsened the overall lending climate for prospective borrowers.
Loan Applicants from Covid 19-hit Sectors Facing Trouble Getting Their Loan Processed/Approved
Though the effect is not uniform across borrower categories, loan applicants from hospitality, aviation and media are reported to be the worst impacted. In fact as per report from a leading business daily, loan seekers working in these sectors are typically a no-no for bankers especially private sector banks when it comes to extending loans to them.
And if at all such an individual working in any of the Covid 19-hit sector happens to get his or her loan request approved and finally loan disbursed it shall be a small amount that attracts a relatively higher rate of interest.
Further the sectors that are being scrutinized are non-food retail and wholesale, textiles, RMG, entertainment, gems and jewellery, hospitality, real estate, travel and tourism.
Unsecured loans, loans to self-employed being scrutinized thoroughly
Also, for all unsecured loans to retail or MSME borrowers, banks are exercising extra caution. Professionals or self employed loan applicants are also having a tough time on account of toughened scrutiny norms.
"Given that the existing portfolio due to this black swan event will lead to higher delinquencies within the short to medium term, they have to provide for that and hence, it is already a hit on the P&L," said Ashish Singhal, managing director, Experian Credit Information Company that assigns loan-worthiness to customers.
Low or least-impact Covid 19 sectors looked at favourably for giving out loans
Loan applicants working in sectors that have had low or least impact from the pandemic are being looked upon by banks favourably. Some of these sectors are pharma, healthcare, agriculture, food processing and technology. "They (banks) want to lend to segments which will be able to go through these shocks relatively unscathed because that will define their future ability to pay back", said Gaurav Aggarwal, director and head of unsecured loans, Paisabazaar.com, said:
For eligible borrowers from the category there has been no impact also on the loan ticket size for both retail and MSME borrowers.
But the situation that surfaces as and when the moratorium period ends in August will be crucial as any major repayment defaults on moratorium portfolio will be taken on by banks by further tightening of credit offtake mechanism. "September and October will be critical because that is when the moratorium ends and lenders are likely to see the first repayments data for the moratorium portfolio. Only after that will the system come back to equilibrium in terms of lending policy and pricing," added Aggarwal.