App-based loan service may be quite slow for a few months

New Delhi (Uttam Hindu News): According to a report by Motilal Oswal Financial Services, due to the entry of new players in the app-based loan service, it may see very slow growth for at least a few months now. Reserve Bank of India (RBI) data shows that the personal loans and credit cards segment has registered a CAGR of 22 per cent in the last two years.

RBI keeps a close eye on lenders to check whether growth in a particular segment is excessive. As a precaution, if the RBI feels concerned it informs lenders to slow down growth. What is noteworthy is that the RBI has not warned about higher growth in housing loans and vehicle finance as the collateral for these loans appears to be better, while the collateral for consumer loans is better, the report said. (Collateral) is weak.

Further, it said, the resulting defaults in consumer sectors could hamper the profitability of lenders. The move is aimed at curbing the rapid growth seen recently across the region. NBFCs and digital fintech lenders will be significantly impacted by this action as they do not have diversified balance sheets. NBFCs may not be able to pass on the cost to customers, which may put some pressure on margins in the near term. While the RBI has presented strong data analysis and projections, there is no concrete data on defaults.