New Delhi, 24th April 2020: Having witnessed a robust year-on-year credit growth of 17 per cent at the end of February, 2020, personal loans have an outstanding of Rs 25.32 lakh crore, posing a grave challenge for borrowers to pay their EMIs on time without default and retain their credit scores, an ASSOCHAM analysis has noted with concern arising out of Covid-19 crisis.

The ‘personal loans’ segment , as defined by the Reserve Bank of India, includes consumer durables, housing, advances against fixed deposits, credit card outstandings, education and vehicles loans.

As per the latest RBI data, analysed by ASSOCHAM, the major components in the ‘personal loans’ (PLs) were housing, vehicle loans and credit card outstandings, among others. Though components like consumer durables, had shown a big y-on-y growth of 43 per cent, the base was small with outstandings of Rs 6495 crore.

”As we deep-dived into the data, the areas of concern appear to be housing, credit cards, vehicle loans and education loans. Though the RBI has granted a three-month moratorium on EMIs, deferment comes at the cost of compounding of interest as the tenure gets prolonged, ” said ASSOCHAM Secretary General Mr Deepak Sood.

The credit card spenders were, in a way, leading the demand push and were sitting on an outstanding of Rs 1.11 lakh crore as at the end of February, 2020 logging a significant annualised growth of 33 per cent. Likewise, the housing sub-segment witnessed an annual expansion of 17.1 per cent with outstanding of Rs 13.30 lakh crore . Even before the Coronavirus outbreak , vehicle loans were acting as driver for somehow reviving the automobile demand with outstanding loans of Rs 2.21 lakh crore with growth of 10.3 per cent. The outstandings for ‘‘other personal loans” aggregated to Rs 7.17 lakh crore with a growth of over 20 per cent.

Though education loans had shown a negative growth of 3.4 per cent, the aggregate outstandings were large enough at Rs 66,563 crore to pose debt – servicing risks, which would only scale up in the wake of employment situation deteriorating because of lockdown and the subsequent costs to the economy.

”The outstanding loans to be serviced in different tenures carry different rates of interest and penalty clauses. For instance, the credit card default attracts huge compounding costs. Moreover, there is not much clarity with regard to credit card outstanding’s in reference to RBI moratorium, ” said Mr Sood.

The PL borrowers always remain concerned about maintaining their CIBIL ‘credit scores’ . ”Most of the personal borrowers are young professionals who have long working career as also personal ambitions ahead of them. We must ensure that their concerns are addressed and their credit scores are not compromised. After all, they are a key component of the India story,” said ASSOCHAM Secretary General.