INDIAN lenders are facing a jump in coronavirus-related defaults on credit card dues, personal and vehicle loans, forcing them to set aside hundreds of millions of dollars and take steps like asking sales staff to track down borrowers who have vanished. A near two-month nationwide lockdown to halt the spread of COVID-19 has clobbered India’s retail financial segment, seen as the last bastion for a banking industry that had already raked up more than US$120 billion in bad loans and is ranked the third-worst among 13 major world economies in asset quality. The provisions for the bad loans are set to significantly shrink profits of privately owned lenders this financial year, while state-owned banks will need yet more government funds to survive, analysts say. Non-repayment of credit card and personal loans has surged in the last few weeks, according to several senior bankers and industry insiders, increasing the troubles of lenders already struggling with soured loans to larger corporates, and potentially slowing down the country’s recovery from the crisis. “The situation is so bad that even people who can pay are not paying up or are delaying their payments and all of this will snowball into a big problem,” said a banker in the retail division of a private bank. ICICI Bank, India’s second-biggest private sector bank whose lending is nearly two-thirds retail focused, reported a quarterly profit last week that fell way short of analyst estimates after it set aside 27.25 billion rupees (US$362 million) for the coronavirus. Banks such as RBL and IndusInd may be hit harder as a weaker deposit franchise makes them more vulnerable. (SD-Agencies) |