Bank loan: The quarter ended in December 2024 saw a major decline in India’s Retail Credit market. Banks and financial institutions first adopted a more cautious attitude towards borrowers (New-to-Credit-NTC), which made it difficult for them to get a loan. Let us know what is the reason for this and will the attitude of banks change later.
Gen Z is the most impact on Gen Z
The strictness of banks had the biggest impact on Gen Z (youth born after 1995). Especially, on those who wanted to take facilities like credit card or personal loan. According to a report by Transonian CIBIL, the loan to the borrowers for the first time has reduced considerably. This affected the entire credit market.
According to the report, the loan approval fell by 21% for the first time borrowers. At the same time, the loans of people already with credit history decreased by only 2%. This means that banks and financial institutions are taking more care in giving loans to new customers.
Difficult for those taking loans for the first time
About 40% of the people who take the loan for the first time want to take credit products related to consumption (such as credit cards and personal loans). But due to the strict policies of banks, it has become difficult for them to take a loan.
Gen Z holds 41% of Gen Z in all new borrowers. They have been the most affected by this change. Now it has become more difficult for them to get the first loan or credit card. This may affect their financial growth and ability to purchase.
Why did banks tighten the policy of lending?
Want to reduce your risk in an atmosphere of financial instability. CEO Bhavesh Jain of Transonian Cibil said, “Banks have strict the loan approval for those taking borrowers for the first time due to their risk-mining.”
He also said that new borrowers can be connected better by using data analytics and new technology properly.
The Credit Market Indicator of the Transonian Cibil has come at 97, which is the lowest level since December 2021. This shows that the availability of credit in the market has decreased due to the vigilance of banks.
Large debt sector also affected
Lack of credit was not limited to small loans, but also large debt sectors were affected.
- Home loan declined by 9%.
- Credit card issuing rate reduced by 32%.
- The growth rate of personal loan declined from 24% to 14%.
- The growth rate of auto loan declined from 14% to 4%.
It is clear that the banks have now become more alert to give loans. This is the reason why the growth of all kinds of debt is slowing down. However, there have also been some positive signs amid this decline. The new loan stake by women reached 37%, while the ratio of women already loans was only 27%. The number of new borrowers in rural areas increased by 32%. Earlier it was 23%.
What will happen next?
According to the report, there has been a slight decrease in the rate of default (EMI) in some loan products. However, not all of these loans appeared in the category, but it indicates that banks may consider loving new customers under new strategies in the coming times.
According to CEO Bhavesh Jain of CIBIL, now the most important is that the credit reaches those who need it. Also, people should be motivated to adopt better loan repayment habits.
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