Retail loans also threaten to become risky due to the economic downturn impacting on employment

Mumbai, Ta. August 29, 2019, Thursday

Various analysts have been closely monitoring the signs of stress on India's retail loans after unemployment in the country rose to a five-year high. Compared to other economies in the world, India's lenders are facing the highest levels of bad debt.

The problem of India's lenders' bad loans is concentrated in excessive corporate debt, and lenders have long considered retail loans to be secured loans. Banks view retail loans as one of growth. Analysts are seeing the potential for risks, as the economy is slumping and credit from non-banking finance companies is declining. However, the number of outstanding personal loans is currently very modest.

Retail loans are causing stress, said a rating agency analyst. Whether these loans will default in large quantities depends on how the economy is shaped here.

Last week, the government announced several steps to tackle the slowdown in the country's economy, especially in the auto sector, and decisions were also taken to ease the liquidity problem of the NBFC. Due to the defaults, the NBFC sector in the country has declined funding. NBFC's role in providing consumer loans has been important. But as NBFCs are currently experiencing a liquidity crisis, it has affected retail loans.

At the end of the June quarter of the current financial year, the number of non-performing retail loans from SBI's total retail loans increased to 8.9 percent from the June quarter of the last financial year. The bank is confident that this will not increase in the current quarter.

If the Indian economy is under stress, repayment by retail loan holders may be under pressure, said another analyst. Trade is slowing down in India as it has a direct impact on employment. Naturally, the power of loan repayment is reduced due to weakness in employment.