Six out of 10 salaried borrowers have a credit score of over 750, as against a ratio of five out of 10 in the case of the self-employed category.
Less than half of all borrowers who take a consumer loan have a credit score higher than 750, shows a report by Paisabazaar.com. Most credit bureaus in India score borrowers in a range of 300-900.
Borrowers who were new to credit and therefore did not have a credit history made up for 23% of the pool. Consumers with a credit score between 701 and 750 accounted for 14% of the sample, while those with scores under 700 made up for the remaining 15%. “In the last 12 months, 36% of these New to Credit customers have got a credit line,” Paisabazaar said in its report titled ‘Making India Credit Fit’. The consumer insights report has been put together by analysing data from the financial marketplace’s customers.
In terms of credit-worthiness, salaried borrowers fare a tad better than self-employed borrowers. Six out of 10 salaried borrowers have a credit score of over 750, as against a ratio of five out of 10 in the case of the self-employed category.
Credit bureau coverage in India stood at 56% in 2018, the report says, citing World Bank data. This is far lower than credit bureau coverage in other emerging economies, such as Russia (88%) and Malaysia (86%). The data takes into account the number of individual consumers and firms listed by credit bureaus as a percentage of the total adult population of a country. In recent years, credit scores have emerged as the chief means of assessing the risk associated with an individual borrower. Bankers often point to the easy availability of credit bureau data as one of the reasons behind a spike in unsecured lending as well as other loans to individuals. Some banks, such as Bank of Baroda (BoB), have earlier offered a price benefit to well-rated customers. In 2017, the lender had decided to offer home loans at its one-year marginal cost of funds-based lending rate (MCLR) without any spread to customers with a CIBIL score of 760 or more.
Despite the use of credit scoring in retail lending, analysts see risks emerging in some segments of the Indian consumer credit market amid a slowdown in the economy. Analysts at Jefferies wrote in a recent note, “For vehicle financiers, asset quality held up largely stable (rather is lower year-on-year), but sustained auto slowdown and worsening cash flows for truck operators could lead to higher delinquencies going forward.”