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Lenders are seeing retail loan demand revival as lockdowns ease

Lenders in the public sector banks are seeing a revival in retail loan demand in July and August as Covid-19- induced lockdown restrictions were eased. But much of the demand is from outside of metro areas, with much of the demand coming from urban, semi-urban and rural areas, said a report by credit bureau- Transunion Cibil

Although not back to the pre-COVID-19 levels seen in January and February 2020, inquiry volumes have started to recover from their troughs in April and May 2020, and in July and August 2020 were similar to levels seen during the same period in 2018m, a report by Transunion Cibil, said.

The lockdown did impact consumers’ ability to apply for credit as lender branch offices functioned with very limited capacity, though use of digital channels continues to pick up in the shadow of COVID-19. At the same time, economic uncertainty caused lenders and consumers to take a cautious approach to borrowing. The credit bureau’s analysis shows that the pent-up demand caused in the process has now started to come through.

The analysis also found that public sector lenders saw the biggest rebound in inquiries most likely because they were early in recommencing operations than their private sector and NBFC counterparts. The July-August loan inquiries were 112% of the levels same period a year ago, but that for private sector banks and NBFCs was 78% and 57% per cent respectively. With larger metro locations witnessing increased cases of COVID-19 and intermittent lockdowns, there was also a shift in the mix of inquiries away from metro locations to more rural and semi-urban and urban areas. The share of metros in total loan inquiry volume fell from 41% in July-August’19 to 37 per cent in July-August’20.

Data show that inquiry volumes for home loans, although still below January and February 2020, were back to the same levels seen during the same time last year in July and August 2019. “This could possibly be due to lenders completing the pending transactions that had been halted at the onset of COVID-19, and consumers seeking to transfer their existing home loans to lenders offering better interest rates consequent to rate cuts announced by the regulator” the report said.

Inquiry volumes for auto loans for July and August 2020 were at 88% levels, compared to July and August 2019. This partial resumption in demand could be attributed to consumers seeking vehicles due to the limited availability and rising fear of commuting via public transport, the report said.

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