Loan products : Loaning the lending industry out of the troubles
Loans have pushed the stalled growth levels in past and if used properly can help the Indian economy to emerge from the state of chaos.
Demand for loan products in recent times, thanks to neutralising recessionary waves, has taken a sound beating. With liquidity levels in the economy still below the required mark, getting and disbursing any kind of loan product for any party (whether lender or borrower) is becoming a big deal with every passing day.
Talk about personal loan products and readers will be astonished to know that before recession hit the shores of Indian economy, the conversion rate for every 100 personal loan pleas was 70-85 (a huge rate indeed). Meaning, that out of every 100 requests for personal loan products, 70-85 were accepted by the lending authorities which primarily comprised of banking institutions.
But the situation no longer exists. Presently, hardly 5-10 applications for personal loan are accepted by the lending organisations in every 100. Reason, well quite obvious, liquidity has been a rare thing for them (lenders) and with increasing bankruptcies and defaults, things have gone from bad to worse. Moreover with government tightening noose around the bank’s neck for not recovering the outstanding payments from defaulters through illegal means (recovery agents, threats etc), cash volumes with the bank have dropped radically.
If that was about personal loans, situation of home loan is no better either. Due to their direct association with real estate, which too has bore the brunt at the hands of recession, lending trend has slumped significantly. Although Indian government’s pro-active measures has done a lot of damage-control but then situation is far from the same ‘booming’ as it was a year and a half back. However, with chief government driven banking authorities slashing and freezing down the lending rates for the time being, green shoots have started to emerge which indeed is a good sign. Taking the cue from their public-sector counterparts, private banking players too have stepped forward with the initiative of offering the home loan products at trimmed rates.
In the above-mentioned situations it was the organisations that were at the losing end. But in case of loans against property, situation is a bit different.
As told above, someone and a half year back, property rates across the Indian democracy rocketed to sky-high in an abnormal way. What followed next was the sudden emergence of the real estate sector as a prominent contributor component to the Indian economy. However, a slump was evident just like in stock market after witnessing a brief surge in the initial phase. Hence, when the time was good, procuring a lump-sum credit deal under the ‘loan against property’ head was easy. But when situation started depleting, getting a loan against property started proving to be a tough nut to crack. The circumstances are more or less same but then people are sitting along the coast, waiting to see sea getting calm down.
If one takes an overview and is asked to deliver a judge mental remark, he or she might not reach to one definite conclusion but then as said above green-shoots have started to emerge and one can sincerely hope that it is the time for Indian loan industry to bounce back thus, bailing the entire banking and lending industry out of the turmoil.
July 31 2009 06:27 am | Home Loan
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