According to Crisil MD and CEO Roopa Kudva, as competition has increased, players in retail lending are reaching out to hitherto untapped clients, such as the self-employed and borrowers from smaller cities. This has increased lenders’ exposure to risk. While expecting this trend to continue, Crisil believed that a reasonable definition of ‘sub-prime’ in the Indian context could include small-ticket personal loans that are given to low-income customers.

Crisil estimates that gross NPAs in these segments have increased to 2.3 per cent and 4 per cent as of March end 2007, in 2008-09, these numbers are seen at 3 per cent for car loans and 5.5 per cent for commercial vehicles. According to Raman Uberoi, senior director - Ratings, September-October 2007 saw a spike in delinquencies because of the slowdown in recovery efforts, following the controversy over the recovery methods of some lenders. A possible fallout of this controversy could see some players exit small-ticket personal loans.

Rise and Rise

• India’s ‘sub-prime’ is defined as small-ticket personal loans given to low-income customers

•NPAs increased for retail loans to 4% from 2.7% last year

• Recent contreversial methods adopted by lenders for loan recovery shall lead to the exit of some players in small-ticket personal loans