New Delhi [India], May 29 (ANI): Almost 73% of credit managers are expected to change their lending strategies, especially for the unsecured portfolio, in order to manage asset quality and mitigate emerging risks in the portfolio, according to one recent survey by PwC Equifax.
The Covid-19 pandemic has put lenders in a difficult position due to declining liquidity and poor growth prospects in key sectors. PwC said the Covid-19 crisis is forcing lenders to go back to their drawing boards and rethink models of sales, service, collection and operation.
At the same time, some organizations are using the pandemic as an opportunity to develop tactical and strategic interventions to build long-term resilience.
Almost 20 CFOs and 70 credit managers participated in the PwC survey conducted in collaboration with Equifax.
As a result, lenders have become more conservative and plan to focus more on existing customers and offer products to support them.
The survey indicates that 36% of credit managers are looking to adopt alternative data in addition to bureaus data for better underwriting.
Additionally, 62% of managers will target existing clients amid moderate credit demand and reduced discretionary spending from prospects.
Significantly, 50% of credit managers surveyed accelerated the use of digital tools for customer acquisition.
The main reasons for concern for banks and other lenders include deteriorating asset quality, as many small and medium-sized businesses, in addition to retail customers, are unable to repay their loans due to declining sales.
Incomes have fallen and job losses are widespread. Several companies fail to recover from the shock and have become delinquent.
The higher cost of capital and the postponement of interest collection resulted in liquidity shortages for banks. Higher operating expenses and a reduced net interest margin compounded the problem.
Even though there are relaxations in risk-related regulatory requirements, maintaining capital adequacy remains a challenge.
Interest income for lenders declined as consumption and demand for loans declined while non-performing assets increased. Unsecured credit has performed less well while secured loans are less affected.
The results of the survey show that the demand for large loans declined significantly after the pandemic, with large loans (over Rs 75 lakh) showing the biggest drop of 80%.
The top five states (Maharashtra, Uttar Pradesh, Tamil Nadu, Andhra Pradesh and Karnataka) alone contributed almost 50% of overdue accounts.
A proactive collection strategy followed by better contactability of borrowers were the two main measures highlighted by credit managers to manage emerging risks. (ANI)
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