The Economic contraction due to the aftermath of Covid-19 may not affect asset quality of home loans as much as it would affect personal loans and credit card outstandings according to research by credit bureau TransUnion CIBIL as when they face budgetary issues, purchasers pay mortgages first. It is anticipated that banks should be more careful and see a drop in approval rates.
“Asset quality will likely be impacted most for personal loans and credit cards with home loans and auto loans experiencing less of a shift,” said a report by credit bureau TransUnion CIBIL.
After analyzing the statistics of the past of consumer payment hierarchy, the TransUnion CIBIL research saw that when the borrowers face budgetary issues, they pay mortgages first, then personal loans and cards are the last product to be prioritized as far as installment commitments are concerned.
The credit bureau broke down consumer credit score, collection roll rates, and installment order to evaluate the asset quality effect on different retail loan items. The examination recognizes that consumer’s financial positions have changed drastically, with many confronting pay cuts and lay-offs bringing about a sharp drop in buyer estimation and the huge hit to consumer demand and spending and will have a critical bearing on the future direction of the retail credit growth and asset quality
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