Banks see rising stress in retail books with LAP, mortgage loans, credit cards spoiling the party

Mumbai: Even as lenders chase opportunities in the retail sector more aggressively, data reveal that delinquency rates have increased in the loans against property (LAP) segment, as well as mortgage loans and credit cards.

The overall retail outstanding balances have grown 21 percent in the September quarter, compared to the year-ago period, fuelled majorly by those between 30-49, according to Cibil data released Wednesday.

Delinquencies in home loans, one of the biggest contributors of the ongoing retail lending boom, however is marginal with only a 0.22 percent spike to 1.73 percent.

Loans against property, which are used many smaller entrepreneurs, saw a more pronounced 0.73 percent rise in the assets where repayments have not been done for over 90 days, taking the serious delinquency ratio to 3.03 percent.

"The number of loans against property has risen at a rapid rate. Lenders must now determine if the rapid demand for these loans, which are an excellent revenue generator, outweighs the recent delinquency increases," Cibil Transunion vice-president, research, Yogendra Singh said.

Lenders must judiciously monitor their risk management processes, he added.

It can be noted that the RBI board has advised a look into restructuring loans of up to Rs 25 crore for smaller businesses at its November 19 meeting. However, deputy governor Viral Acharya pitched for public credit registry, saying such tools are more preferred over forbearances.

Credit card delinquencies grew 0.28 percent to 1.78 percent during the same period, show the data.

In what can raise concerns, the data show that there has been a rapid increase in the number of unsecured accounts being opened, with credit card numbers growing 32 percent and personal accounts being up by 15 percent.

Among the segments with higher stress, LAP borrowers held average balances of Rs 34.93 lakh, credit card average was Rs 46,000 and home loan average was Rs 17.03 lakh. Barring LAP, the other two saw an increase in average tickets.

"It's immensely important that borrowers understand the importance of continuing to pay on time. This is especially important for younger consumers, who are generally less experienced in managing debt and are still building their credit habits," Singh said.