COVID-19 Expected to Alter the Demand-Supply Dynamics of India’s Retail Credit Market

COVID-19 Expected to Alter the Demand-Supply Dynamics of India’s Retail Credit Market

 

·       New retail credit outlook report predicts a significant change in demand for certain retail credit products, whilst lenders take a more cautious approach

 

·       Macroeconomic factors and their effect on consumer finances are projected to lead to an increase in delinquency rates, which are anticipated to be more pronounced for unsecured lending products

 

·   Lenders need to innovate and redesign their operating models to better support consumers in these unprecedented times

 

Information and insights provider, TransUnion CIBIL, today published a report that sets out a potential outlook for the Indian retail credit market in the wake of the COVID-19 pandemic. The study draws on lessons learnt from the previous financial crisis to help map potential changes across the major retail credit categories.

The report attempts to answer key questions such as, how the operating environment may change for lenders, what the effect may be on retail credit growth and the likely impact on asset quality, and lays out the key implications from these findings for lenders to incorporate into their strategies.

By tapping insights from the last recession and understanding what macroeconomic factors drive the shifts in consumer demand and asset quality, TransUnion CIBIL wants to ensure that lenders are empowered to plan with greater certainty and can continue to support consumers during these unprecedented times, whilst also effectively managing portfolio risk.

 

Abhay Kelkar,vice president of research and consulting for TransUnion CIBIL, explains: “Prior to COVID-19, India’s retail credit market was still growing at a much higher rate than most other credit markets around the world. However, this is a global crisis and no economy is immune. Despite the Indian government launching one of the largest economic relief packages in the world, the social, financial and economic impact of COVID-19 will be far reaching and will lead to a realignment of the retail credit market.

 

Consequently, lenders need to respond to the changing market conditions by redesigning their distribution networks and customer management frameworks, realigning their lending strategies basis their own risk appetites, and implementing analytics-driven risk and collection management practices to minimize the impact of emerging risks.”

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