The stress in the consumer credit sector, which was once a cash cow for banks and non-bank financial services, is only increasing, as reports and updates from these lenders show. The credit card segment is a critical point in RBL Bank’s statement in the media regarding business updates. Absorption stopped during the blockade; only cards with the digital code are ordered, according to the private bank.

She added that credit card costs had decreased by 40% during the suspension, as the bank was expecting a slight increase in credit costs in March. In a telephone call organised by UBS, HDFC also reported that the number of card exchange transactions had decreased by March.

All this suggests that banks and lenders in consumer affairs (credit cards and personal loans, usually unsecured) are dealing with beer. A weak comment from Bajaj Finance added oil to the fire, and with it the hope for a recovery in demand in the near future.

But how exhausting can pain be?

UBS analysts expect growth in retail lending and commission income to suffer from social exclusion and reduced discretionary spending. The banks that are subject to the above conditions will be the ones that suffer the most, adds the broker.

IT’S STILL READABLE: The inflow of gold into the ETF in March 2020 amounted to 23 billion dollars: WGC

While consumer finance forms the basis of Bajaj Finance and Capital First (now IDFC First Bank), the banks joined the party too late.

The growing weakness of traditional retail loans, such as housing and car loans, has prompted banks to diversify into consumer credit.

Among the banks the segment is led by HDFC Bank, which is closely followed by ICICI Bank and Axis Bank. RBL Bank – with its links to Bajaj Finance via credit cards – has also conquered this segment.

From the dairy cow to the Achilles' heel

Rising income levels of consumers and their ambitious needs were a prerequisite for lenders to develop this activity. In addition, as the lenders focused on their existing customers, it was not important that the loans were unsecured.

But times have changed and the banks are tightening their portfolios. At a time when some sectors, such as air transport and food supply, are facing job losses and wage cuts, the consumer credit segment is suddenly the most vulnerable.

Analysts at the Kotak Equities Institute believe that demand for retail and unsecured consumer loans will continue to grow into the 20th century. March 2020 is down 10-29% per week, indicating a sharp drop in demand.

While it can be argued that there is a delayed demand for discretionary spending, which is temporary after supply-side lock-in and demand interruptions, a significant increase in salaries over the next 1-2 years still seems unlikely, – said an analyst at one of the internal brokerage firms.

Therefore, even if demand recovers, the additional layer of expenditure observed before the recession may not return. We won’t find people updating their cell phones every six months or taking a loan for a wedding or luxury celebration, the analyst said.

In short, even among bankers there is a belief that the practice of using credit to improve their lifestyles will take a step back.

Although part of the pain in the results of 4. Although private creditors may be in the third quarter, analysts say that the results of the June and September quarters will be decisive in assessing the quality of these creditors’ assets.