In a major indicator of the growing risk aversion among banks in a slowing economy, data from India's largest credit information bureau, Cibil, shows banks are now largely focused on lending to consumers with the highest credit rating and that too against secured assets.
“It has been observed that 60% of the loans are given to consumers with a credit score of over 800. Around three years back, most banks were lending to consumers even with a score of 500-600. Post 2008, banks have started tightening their credit policies and reducing exposures primarily to unsecured debt like credit cards and personal loans. There is a shift towards secured products such as two-wheelers, auto and home loans,” Arun Thukral, MD of Cibil said.
The Cibil TransUnion credit score ranges from 300 to 900 based on multiple factors like the loan value and type, number of times one has applied for a loan before and the payment history. A low score indicates a higher probability of default.
There is also a 1 to 5 risk index for individuals where less than six months of credit history is available.
A Cibil report released on Wednesday said that while auto loans segment has shown the highest growth in the last three years in the retail space, delinquencies have also increased to over 2.5% in end-2012, from around 1.3% in end-2010.
“Auto loans have jumped five times in the last three years on increasing financing availability especially in the smaller towns. But the delinquency trend is a little high, which is a worry with banks now. The highest delinquencies in the Category C cities (3.2% in September 2012),” Thukral said.
Category A cities had the lowest delinquency of 1.7%, with Ahmedabad and Mumbai-Thane having the least defaults. Category A refers to the top 8 cities like Delhi-NCR, Mumbai-Thane, Ahmedabad, Bangalore and Chennai, and Category B refers to 16 cities including Baroda, Bhubaneswar, Lucknow and Chandigarh. Category C cities refer to the smaller cities in India.