Coronavirus-led lockdown across most parts of the country is having an impact on the financial lives of individuals. Getting loans to tide over an immediate financial crisis may not be as easy as it was earlier. The situation last year in 2020 was almost similar and the government had to introduce the EMI moratorium scheme. “Last year, Banks and other large lenders were extremely conservative in giving out new loans for the first few months of the pandemic, largely due to the widespread income and job loss and disruptions in the economic activities. However, as the economy started recovering, the supply of new credit by banks was also gradually restored, for most consumer segments,” says Radhika Binani – Chief Product Officer, Paisabazaar.com
However, now after the second wave has stuck, the borrowers may again start feeling the heat. “The new rise in covid cases and the resultant restrictions may slow down the recovery, as most Banks may again choose to be cautious and have a wait-and-watch approach to see how the situation unfolds. However, at this stage, only consumers severely impacted by the restrictions like the section of SMEs or those employed in affected sectors like hospitality, tourism, travel etc. may find it difficult to get a loan,” adds Binani.
The fear of default in repayment of loans may be an important factor for the banks to lend cautiously. “Banks are overall lending at a slower pace compared to pre-covid. However, Retail Lending is an area of aggressive expansion and banks are tightening their credit norms on retail lending, but there is still enough untapped market for them to lend aggressively but wisely,” says Anshuman Panwar, Co-Founder, Creditas Solutions.
The lockdown results in a pause in commercial activities thus impacting the business class of the entire town or city. A section of the salaried class may still be working from home. So, are salaried individuals impacted more than self-employed when going to take loans from banks and other lenders. “The Credit profiles of salaried people are getting back on track, however, that of self-employed people are still affected as small businesses are still witnessing the effects of COVID. There is a one-off surge in payment bounces for banks but it will normalize in a few months as the situation stabilizes,” informs Panwar.
As and when normalcy returns, getting credit may become easier. “But if the situation worsens, more consumer segments may struggle to get access to new credit,” adds Binani.
In the meanwhile, all those who have an emergency fund in place may have to use it in the present circumstances. It’s time to revisit the household budget and cut-down on some of the discretionary expenses till the situation improves. Make sure to keep servicing exiting loans so as to have a decent credit profile and credit score.