Consumer loan demand for two-wheelers and consumer durables dropped 43% and 60%, respectively, below the expected levels during November and December, credit information company TransUnion Cibil said in a note on Wednesday. While the number of applications for two-wheeler loans stood at 8 lakh, 12 lakh applications were made for consumer durables during the two-month
The drop came in the wake of the government’s decision to demonetise R500 and R1,000 currency notes, announced on November 8.
Demand in the housing loan segment was 27.3% lower than expected at 8 lakh applications. Applications for loans for personal consumption were 23.8% lower than expected at 16 lakh and those for auto loans were 16.7% lower at 15 lakh. Credit card applications were in line with expectations, clocking a figure of 21 lakh during the two months. Overall loan applications – at 1.03 crore — undercut expectations by nearly 31%, Cibil said.
The report said that before November 8, credit demand was growing at an average 35% on an annual basis across all loan products, with significant year-on-year growth in demand for consumer loans, which had risen 71%, and credit cards, which grew 41%. The growth was broad-based across the spectrum of lenders, with NBFCs leading the pack with a 54% y-o-y growth in consumer credit applications between January and September 2016.
The growth rates were broad-based in geographical terms and were accompanied by historically low non-performing asset (NPA) rates as banks instituted strong, data-driven risk management practices, Cibil wrote.
“In the week after the demonetisation announcement, TransUnion Cibil saw a significant decrease in new credit demand, with the focus for both consumers and bankers being cash exchange and collections,” said Amrita Mitra, vice president- financial services research and consulting, at TransUnion Cibil. “Two-wheeler and consumer durable loans, usually serviced by private banks and NBFCs, were most negatively impacted—significantly in key geographies like Maharashtra, Gujarat, Andhra Pradesh and West Bengal.”
Mitra attributed the steady growth in credit card applications to the “’go cashless’ objective of the demonetisation policy”. “We believe the demonetisation policy is set to pave the path toward a more cashless economy, in turn fuelling wider credit penetration and financial inclusion,” she said.