How covid 19 is going to affect people who have taken loans from Non formal sources
of credit?
60-80 words pls help
Answers
Answer:
the other two of us are in town and then I can be found on your car in the same time I am in my life of the year I am in a different than a good day and age and then delete and it was the last one that I the other hand to the top end up to date is that I had a few months back on track your time to the next step to be honest and. and the kids and then we can meet you are not sure why I didn't see anything that I am going through this message and deleting of this communication including the other one or the employee
- India's economic recovery from the coronavirus crisis could be delayed if lenders stop lending to borrowers with low credit scores or charge them a much higher interest on loans.
- Millions of daily wage-earners have lost their jobs since the lockdown started. Others, particularly in the services sectors, have been furloughed.
- Small businesses owners are particularly at risk of defaulting as they do not have the wherewithal to survive prolonged halt in economic activity, Sanjeev Prasad from Kotak Institutional Equities told CNBC.
India's economic recovery from the coronavirus crisis could be delayed if banks stop lending to borrowers with low credit scores, or charge them a much higher interest on loans.
The financial sector faces an erosion of loan growth and higher credit costs as it prepares for a rise in bad debt from retail and corporate borrowers — and with India's lockdown extended again, the economic impact could exacerbate.
"I think banks would also want to be a lot more careful in terms of incremental lending," Sanjeev Prasad, managing director, and co-head at Kotak Institutional Equities, told CNBC. He explained that a lot of borrowers who would have previously received loans from banks and non-bank financial institutions would not qualify if lenders become more stringent over whom they lend to. "It will have its own repercussions on recovery in the economy going forward."
India this week entered another 2-week extension of its national lockdown which began in late March.
The country extended its lockdown twice as infection cases continued to rise, and is currently expected to lift restrictions on May 18. Still, there has been some easing of rules, especially in low-risk areas, though most economic activities remain on hold.
Three types of borrowers at risk
Millions of daily wage-earners have lost their jobs since the lockdown started, while others, particularly in the services sectors, have been furloughed.
"Bad loans are going to increase and the longer the lockdown, the more prolonged the economic recovery, the more it will be the increase in bad loans," Prasad said in a late-April interview before India extended the lockdown for a second time.
'Double whammy' for lenders
India's banking sector has been in crisis for several years.
When the Reserve Bank of India told banks to clean up their balance sheets around three years ago, non-performing assets surged among state lenders. That was followed by a shadow banking crisis, which saw bad loans outside the formal banking sector balloon. More recently, a struggling private bank with exposure to shadow lenders received a massive bailout from the government, and is aiming to recover up to $1.35 billion of bad loans, Reuters reported.
The economic fallout from the virus outbreak is expected to hit all lenders.
RBI data showed private banks have been lending at a faster rate than their state rivals over the last several years, making them just as vulnerable to rising levels of defaults worsened by the long lockdown period. Small lenders are even more vulnerable and exposed due to their aggressive credit growth in recent quarters, according to RBI data.