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NBFCs are not giving loans due to fear of increasing defaults, know full detail

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Due to the second wave of Corona, most people are unable to pay the loan installments. Due to which the collection capacity of non-banking institutions has been reduced. In such a situation, he is not passing new loans.

Loan process

Due to the lockdown in different states due to Corona epidemic, people are not able to repay the loan installments on time. Non-bank lenders have slowed down the process of disbursing new loans due to reduced payment collection. Also, unsecured loans have been completely banned. Non-banking finance companies (NBFCs) are afraid of default, due to which they are not passing new loans.

Prior to the Corona era, money collection capacity was up to 2-3%, but the default rate of NBFCs companies has increased since the second wave of Corona. It is said that about 6-8% of the borrowers have not paid installments during the epidemic. In such a situation, non-banking financial institutions have stopped loans given to small scale industries and personal loans.

According to the TOI report, Chief Risk Officer Sanjeev Srivastava says that even in secured advances such as loans against property, the company has reduced the debt-to-value ratio from the earlier 70% to 50-40%. During the epidemic, checks and payment system of property, housing and gold given on gold have also been made tighter.

Chulamandalam Investment and Finance Executive VP and CFO Arulselvan D said, “In Quarter 1, we want to be more cautious. The payment system will improve after the fall in Corona cases. It is difficult to predict the new lending risk right now, especially when our employees want to stay safe and protect their families. We hope that the third COVID wave does not come, which will again suffer losses. “

The collection efficiency of loans has come down from 115% in March to 95% in April 2021. Regarding this, Arulselvan D says, “The severity of the lockdown was more visible in April when we saw the impact on collection efficiency. Thus, given the potential impact of the second COVID wave, we have made an additional provision of Rs 350 crore in the March-ended quarter, 2021. ”

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Bhagyashree Soni
Bhagyashree Soni is a software engineer with soft writing skills. She is a degree holder from the International School of Entrepreneurial Leadership. She has been a state-level badminton champion and chess player. A woman with a forthright attitude enjoys her writing passion as her chosen career. Writing in the context of feminism, social-cause and entreprenurship is her forte.
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