Increase your credit limit by exhibiting

Your credit limit may be raised if you exhibit timely and do full repayments. However, having a high credit limit and multiple lines of credit may hurt a person’s overall credit rating. In these cases, new potential lenders can see that the applicant has access to a large amount of debt, which may lower the chances that this person will be able to repay his or her debts in the future. As a result, new potential lenders might be less likely to offer an additional source of debt.

Information required by lenders

Relying upon the credit increase amount that is requested and the length of time the borrower has held the line of credit, a lender may ask for information directly from the borrower, pull a credit report or use information it already receives from the credit bureaus each month. Such information as employment status, income and housing expenses will be requested of the borrower. The lender may also look at the borrower’s payment history, including whether payments are made on time, how much credit is regularly used and how often the balance is being paid.

What influence your request?

Your request could be affected negatively for a credit increase if you are subjected for making late payments from the previous six months; whereas monthly payments that are a higher percentage of the balance have a favourable effect. The financial institution considers the client total amount of debt; the number of other lines of credit; the number of other requests for credit that have recently been reported to the credit bureau.

Conclusion

In case, your request gets refused then a credit increase may negatively affect your credit score, because the request is reflected in your credit history for a short time. If a request is denied because the current amount of credit is too high, then an increase can be requested again once some of the balance has been paid.

Source: Secondary

Find your credit score

Do you know your credit score as per Credit Information Bureau (India) Limited (CIBIL)? If not, find out immediately and if yes, use it to your advantage. When you apply for a product, a ‘credit check’ is done. It’s an attempt to predict your future behaviour based on what you’ve done in the past. In a nutshell, your credit score can determine if a loan application you make will be approved or turned down.

CIBIL implications on you

Banks, especially public sector banks, consider the credit score of an individual before sanctioning loans. Regardless of either you need a large or small loan, review your CIBIL Transunion score and Credit Information Report before filing your loan application with the lender. This could acquire you a fast and simple loan processing. In accordance with CIBIL reports, a Transunion score is a 3-digit numeric brief of your credit history which symbolizes your financial and credit strength. Your score is emerged from credit history which ranges from 300 to 900 points as specified in the Credit Information report. This score is calculated based on your history with financial institutions such as banks and credit card companies. The CIBIL CIR is given to you conjointly with your score considering that the grounds on which your credit score is developed. The lender undergoes your credit report and score to determine your repayment capacity. If you score higher, your success rate of getting your loan application approval could be better.

Low your interest outflow with good score

If you have been diligently paying your credit card dues and other loan EMIs, you will have a good credit score as per the information collected and displayed by CIBIL. However, if you have settled your outstanding credit card dues by making partial payment, it will reflect in your credit score. This can affect your chances of getting a loan, as many banks consider your credit score as per CIBIL together with other factors such as your age, income, occupation, prior relationship (if any) with the bank, etc. before sanctioning the loan.

Here’s a table to give you an idea of percentage of new loans sanctioned to people with different credit scores:

Credit score	Percentage of new loans sanctioned
<650	4.7%
650-699	5.2%
700-749	9.7%
750-599	22.8%
>=800	57.6%
source: cibil.com

Hence, if you are looking for a loan, be it a home loan, personal loan or car loan, you must know your CIBIL rating. Armed with a good score, you can get a better deal by negotiating the interest rate on the loan or get other related charges waived off. You can lower your interest rate which goes a long way in reducing your EMIs.

A good score allows you to avail a wide spectrum of credit from various lenders. It also means that you will be able to easily secure a new credit card or get a loan at more favourable terms because of the choice of lenders. On the other hand, if you don’t have a good score then you will have to make do with either no borrowing or borrowing at a very high cost.

Source-secondary

Error in report? May fall in disputes!

The business of reporting consumer credit is highly regulated. Your Credit Information Report (CIR) plays a large part in the loan application process. Hence, any discrepancy in your CIR may result in reduced chances of a loan approval. Therefore, it is important that the information on your CIR is accurate and updated. You have the legal right to obtain a free copy of your credit report from any of the major credit bureaus once a year, which is a right you should certainly exercise. If you find information that is incorrect, you need to understand which errors you can dispute, along with how to report them.

Your credit report holds information about which companies have granted you credit, how you have managed your loan obligations and who has performed an inquiry into your profile. The only way to spot incorrect information is to review your credit history yourself.

Errors commonly arise for two reasons:

1. Creditor makes a mistake when supplying information to the credit bureaus,
2. Or the bureaus do not correctly compile your otherwise disbursed information from their databases whenever your credit report is requested.

Commonly, these errors result from mistaken addresses, mistyped social security numbers or confusion between similarly named borrowers or relatives.

Disputed fields in your report

Common areas of dispute include listed debts that are not yours, debts that are yours that are not listed on the credit report, debts that reflect an incorrect or incomplete payment history, debts that should have been removed from the credit report due to age and are still listed on your report, and inquiries from lenders that you did not authorize to pull your report.

Resolving the mistakes

The easiest way to fix a mistake is to approach the original creditor that sent the information to the bureau. The creditor is legally required to transmit a correction when it knows that it has made a reporting error, which can save you some unnecessary paperwork. A dispute request can be raised based on either a CIR purchased by you directly from CIBIL or a CIR accessed by the Credit Institution (CI) with whom you have applied for a loan to maintain your federally protected rights, but this is still a faster solution.

The CIBIL is a wonderful resource if you are considering disputing an item. It can help you figure out which items can be disputed and what kind of documentation or other proof you need, and it can supply advice on how to proceed. The investigation is normally completed within 30 days. It is possible that your dispute may not result in a corrected report right away.

 Source- Secondary

3 things to look for in your Cibil credit report

You are advised to check your Cibil report every year. Just like one would take a annual health check up to ensure all parameters are within the normal range and no red flags are popping up, so also one should check the CIBIL report annually i.e. do a financial annual check up.

There are no reporting errors from the lender

You should check your Cibil credit report at least once a year to make sure there are no errors that could keep you from getting credit or best available terms on a loan. You should also check your report before making a major purchase that would involve a loan, such as a house or a car.

While sending information to the credit bureau the lender or the bank could have made some errors in reporting your credit transactions. The first step is to find the errors by actually reading the report and not tossing it in a file after reading the Cibil score. When Lata got hold of her Cibil report and read it she saw it still showed an a outstanding amount of a credit card payment, which had expired and surrendered over 2 years ago. This wrong information was greatly responsible for lowering her Cibil credit score. So if you find mistakes, the immediate action should be to fill out the dispute form for the credit reporting bureau. If the error is actually with the creditor who reported the account, you may also need to write a letter to the creditor or alternatively raise the dispute with Credit Bureau for correction. Maintaining a high Cibil score is essential to a healthy financial future.

Is your identity stolen?

Check your report for any credit applications/enquiries that have arisen there are not made by you.  For instance, if you see a couple of home loan application in your Cibil report that you have not made, it can be a sure sign of identity theft. Look out for signs of identity theft. Alerts for possible fraud include:

• Loan accounts that you have not opened
• Credit inquiries not made by you
• Any late payments or defaults that were not made by you
• Address and Identity information which are not yours
• Phone number reported which you have never used

Incase you suspect an identity theft, immediately report any suspicious information or activity to the credit bureau that issued the Cibil report and to your banks too.

Account information

A large bulk of the information in the Cibil report is your account information - a list of your loans and credit card accounts. This is a good time to review your accounts. You can cross check the various accounts, the credit limit, current balance and payment history. Make a note of accounts that were closed or made inactive by the bank and those that have late payments or negative remarks associated with it. See which ones are active and if you would like to consolidate any of them, organise paperwork in the accounts and in general do the financial housekeeping we tend to postpone.

Source-secondary

Borrower Data Under One Roof- Equifax

Equifax India, a credit information solutions and analytics company, has introduced a software product called BureauOne to simplify the money lending process.

Custom-created for India, BureauOne collates various credit bureau responses and serves as an intelligent router that connects the lender's loan processing systems directly with all the major credit bureaus operating in the country.

Using this tool, lenders can easily submit one inquiry to BureauOne, and the product will send back a result of reports from all of the bureaux connected to it, giving customers the ability to improve the credit appraisal process more efficiently.

Simply put, this means lenders need not seek data of borrowers from multiple agencies.
                 

Shahid Charania, managing director of emerging markets, Equifax, said, "This multi-bureau solution will reduce operational costs for our customers. The solution was built for India and is customisable through all phases of development and deployment to ensure that it is exactly the kind of product that meets our customer requirements."

The solution empowers lenders and businesses to make better underwriting decisions in the most cost effective and timely manner while also eliminating duplicate efforts to input and retrieve consumer information, it said. The solution also comes with a rules engine that can be configured to send the same enquiry to multiple bureaus based on responses received from the first bureau, leaving little room for human error.

At present, BureauOne is being used by some of the leading players belonging to the public and private sectors and the NBFC segment.

"The BureauOne solution is helping us in implementing our multi-bureau strategy," said Rajiv Sabharwal, executive director, ICICI Bank. "With the advent of multiple bureaux in the country, it is imperative for us to develop capability to use the data being provided by them. BureauOne allows us to do that without creating any operational strain on our resources."
Visit- www.cibilconsultants.com
Source: Secondary

Credit score change again? Know why?

We believe if we don’t change any of our financial habits, our credit shouldn’t change. But our credit score depends on our credit history which keeps changing, little every time. When you generate a credit score from a credit bureau, it generates a new credit score for each credit score request and gives you the updated credit score. 

These three credit reporting bureaus- CIBIL, Experian and Equifax  create your credit reports and your credit score is based on that. When the credit bureaus receive new balances, inquiries, recent payments and any other information from your lenders; your credit report is updated and a new credit score is calculated based on this updated information. Any minute variation in your credit line could have an impact on your credit score, the main factors being changes in your payment and borrowing behaviour.

·   When you make payments, your total debt amount reduces, which is one of the factors to calculate your credit score.

·   Old items i.e. negative credit history like bankruptcy disappears from your credit report after 10 years and that may account for some changes in your credit report.

In the same way, when you close old credit card accounts they fall off your report after a period of time too.

·   When you use too much of your available credit, your credit utilization ratio rises thereby dropping your credit score. Keeping it low is the key to maintain a good credit score.

All these may account for small changes in the credit report, but they are changes nonetheless.

visit: www.cibilconsultants.com

Source: Secondary

Pay off with credit card to increase your CIBIL score.

Credit reports are used by loan companies to help them determine whether you are a good risk or not and if you are likely to repay any loan taken out. There are some very simple steps you can take to raise your credit rating. Many of these actions are things not to do also.

"If you consistently pay off your bill as soon as you receive it, your balance will remain lower. If, on the other hand, you continue to charge up the card between receiving your bill and paying it off on the due date a couple of weeks later, your reported balance will be higher. This increases the chances that when the credit bureau takes the snapshot, your credit utilization ratio will be higher."

Avoid jumping from credit card to credit card.: If you "transfer your balance" - a scheme that doesn't hurt you, and gets you 0% interest on your balance for a period of time, sometimes as long as a year – unnecessary don't open the new account. Your credit history looks better to the credit bureaus if you have long-standing, established accounts.

Rely on your seniority in age: You can't do anything about, being older, but at least there's something good about ageing! Age is one of the personal factors which bureaus take into account while giving the credit ratings.

Regularly pay your bills on time: This is actually first in the order of things you must do to better your credit score. Each late payment is affecting your credit score and presents a picture of unreliability. You must determine that, if you want to improve your CIBIL score, you should pay your bills on time. The biggest hunk of your credit score is based on your payments history.

Source: Secondary

They don't hurt your score

Nowadays, people have been extremely careful about their credit health so as to secure better loans with low interest rates. But mostly such people focus on what affects their credit score and ignore certain myths about things that supposedly affect their credit scores when they don’t. It’s necessary to know about what things don’t affect your CIBIL score so that you don’t waste time fretting over them.

Income: 
It will sound good to you that, income doesn't directly affect your credit score. Creditors know about your income from your application, not from your credit report. Income doesn't negatively affect your credit score but lenders would take your income into account to determine whether you would be able to make payments in future.

Personal Information:
Name, Address and birth date is included in your credit report but other than that your education level, marital status, race, age and gender won’t effect your credit rating whatsoever nor would they be taken into account to calculate your score.

Checking your credit report:
remove the myth and get clear that, checking your credit report is good financial habit and checking it at regular intervals won’t affect your credit score in a negative way but rather help you know more your credit health.

Application for credit rejected: 
When banks turn down your credit card or loan application, people believe that your credit report is affected. But this is purely myth, your credit report doesn't show if an application is declined or approved. Yes, there would be inquiries against your report when you apply for these loans, but being approved or rejected seriously won’t affect your credit score. So, feel happy about it. 

Paying bills of other people and small merchants:
Bill payments to small businesses don’t help build your credit score because most probably they won’t even show up on your credit report. Credit bureaus have strict requirements about who reports information to them and usually small businesses don’t fit into those requirements.

Also paying off somebody else’s bill won’t have any affect on your credit score. When a bills gets paid, it doesn't matter who paid it, the payment would get reported on the file of the person who borrowed the money.

For more queries visit : www.cibilconsultants.com

Source: Secondary

Get loan with almost NO or bad Credit score?

An individual with low or no credit score has a hard time getting a loan as they are looked upon as a lending risk that may default and leave the lender in losses. People with no credit find themselves into a muddle state since, banks refuse to give them credit as they have no credit history and they need credit to build themselves a credit history. So what do you do in such situations? How do you get credit to build your credit history:

Be ready to pay a deposit: 
Understand that you do have a bad credit score and you’ll be needing to pay a deposit to get a card or loan. Many people shy away from secured cards as they have to pay a deposit against it. But remember that, a secured card is the best way to improve your credit score, as in almost all cases you’ll be denied a card or loan with bad credit. So, this is the easiest of all to build your credit score quickly and then apply and get accepted for better loans.

Also, make sure you apply for a secured card which reports your on-time payments to the credit bureaus. Some cards do not do so, and all your efforts of being credit responsible will go to waste as your good habits aren't reported to your credit report and there will be no difference to your credit score.

Credit builder Loan: 
This is something similar to a secured card but in the form of a loan. Here, the bank will lend you a small loan for an object you needed to buy. The object is being held by the bank while you make monthly payments to the bank and the possession is given back to you when you pay off the whole loan. This not only gets you the object which you wanted to buy but also helps you build a good credit record.

Avoid Multiple credit applications:
In all these though, you need to avoid applying for multiple credit lines. Applying for multiple credit lines  at the same time does more damage than help. Multiple credit applications leads to several hard inquiries against your credit report which lowers your credit score. So be slow, research well and be selective about the credit you apply for. It is very dangerous for people with no credit as they look as an individual having no credit to bursting into the credit scene which can be bad for their credit health. Don’t waste your time on credit cards or loans which require excellent credit- it is a waste of time as well as a dent in your score due to the multiple inquiries.

Discuss with lenders:
Talk to your lenders before you apply for a loan. Some lenders have services wherein they can pull out your data, which may be not be included in your credit score but may show your repayment patterns and credit worth. Though, it is not included in your credit score, but the lenders may be willing to take a risk and give you a loan despite your bad credit.

Source: Secondary

Rewrite Your Credit History For Financial Freedom

In India, most working people start thinking about their retirement after they are well into their 30s or 40s. However, to have a financially strong retired life, ideally one needs to think and also plan) about retirement soon after taking up the first job. That way, time would be on his/her side to build a substantial retirement corpus over the long term through a disciplined investment approach. In other words, time and the power of compounding would give one financial freedom during his/her sunset years. 

So what is financial freedom? "The word freedom evokes a sense of hope, inspiration, choice and joy all at the same time, and could mean very different things to different people ," says Vishal Dhawan, founder, Plan Ahead Wealth Advisors. 

"Financial freedom is something which can give us the same sense of emotions of liberation for the money side of our life," he adds. However, according to Dhawan, you need to remember that financial freedom is not a gift, but an achievement. "We have to put in active efforts to achieve this phase of financial freedom in our lives," he says. 

To achieve this goal, Dhawan suggests a few easy-to-achieve steps. These are knowing your exact financial position, crystallizing your goals, building a road map to reach those goals, followed by concrete action according to the road map, then sticking to the plan and, lastly, reviewing the plan periodically but not too frequently .

"These steps may not give you financial freedom tomorrow but remember that, just like a journey of a thousand miles begins with a single step, your journey towards financial freedom begins when you firm up your mind about achieving the same," he says. 

A related article by Vikrant Gugnani details the steps you need to take to have a financially independent life over the long run. 

Leaving positive footprints 

Here, we give you some idea about another aspect related to your financial dealings that can have substantial bearing on your financial freedom: Your credit history (called credit footprint) and why increasingly it is becoming important in every individual's life. As the term suggests , the credit history of an individual is that person's track record of dealings with various institutions like banks, home loan and other financial services firms and also other companies where an individual may have left some monetary dues — like telecom service providers, etc — knowingly or unknowingly . Put simply, if your credit history is good, you are always in a sweet spot to easily avail of loans from a lender or get a credit card from a card-issuing institution . On the other hand, if your credit history is bad, you may have a tough time getting a loan or a credit card. According to Mohan Jayaraman, MD, Experian Credit Information Company of India, individuals need to be very careful about their credit histories. However, the reality is that not many people are careful about the same and, over the long run, this may affect the financial life of an individual. 

Taking care of your history 

According to Jayaraman, the first step is to take out a consumer report from any of the four registered credit bureaus after presenting appropriate know your client (KYC) documents like a PAN card, driving licence , Aadhaar card, or some other government-approved proof for an individual and his/her address. There are four sections in this report. The first is the demographic report in which there will be the name, age, address, etc. You should check if these things are correct, or get it corrected in case of any wrong entry. The next section is the credit summary which gives details about loans, credit cards, etc, that you have taken. 

The third section is called the credit tradeline where the status of the loans, credit cards, etc, is given. The report will also give you data about how many credit cards you hold and the status of each. It could be that you may have used a credit card many years ago but have not cancelled it, although you think it was cancelled. 

As a result, some huge dues may have piled up in that credit card account . In such a situation, you need to correct the tradeline data. 

The fourth section is about the number of enquiries the credit bureaus got about your application for loans, credit cards, etc. In other words, it gives the whole summary of the number of times you have gone to banks and other lenders for loans, credit cards, etc. 

For a smooth financial life, although the first priority is to have a disciplined and well thought-out long-term investment plan, having a good credit score, which comes from a solid credit history, is also essential, according to financial advisers. 

Source-secondary

To fulfill your dreams, don't ignore your credit health

Can you imagine how credit score and credit history can obstruct in fulfilling your dreams!! 

Nowadays credit score and credit health are gaining importance. These things are analysed by Banks, Financial institutions, Insurance companies, Telecom companies and even by Employers. People with low credit score and bad credit health face a lot of difficulties in getting finance from the market.

As the rising importance of credit score and health, every individual have to mark these things important in their personal finance and keep themselves updated; otherwise they could face difficulty as faced by Mr. Manish Kumar.

Mr. Manish, a middle class businessman was happy with his life. He was very good in his work which inspired him to expand his business which could change his life in the future. His dream was to have a respected name in the market. He did not want to be a billionaire, but just wanted a good name in the market.

He did not have sufficient funds which he could invest to expand his business. After all his thoughts, he finally decided to apply for loan for bank. He was confident that his loan will be accepted. 

One day while he was working in his office, he received a call from the bank which informed him that his loan was rejected. He was shocked to hear this news. He was totally depressed. He asked his agent (advisor) the reason for rejection, which informed him that his loan was rejected due to his bad credit health.

Manish was unaware about the term “credit health”. He was also unaware that bad credit health could affect in his loan approval. He also came to know that his credit score was low i.e 550 as he had defaulted payment in the past. He never knew that defaulting on payment could raise this impact on his report and reduce down his credit score.

Where credit score is a three digit number which ranges from 0-999 for all the bureaus. It is calculated by credit bureaus. The three major bureaus in India are CIBIL, Equifax and Experian. These bureaus collect data from all the banks and financial institutions in the country. Generally a score of 750 and above is considered to be a good.

Individuals with score lower than 750 will find it very difficult to avail loans and credit cards from banks and financial institutions. 

Maintaining a good credit health and credit score is nowadays essential for individuals, if not taken proper care will result in rejection of loans and credit cards or will have to pay high interest on the same. 

Many people like Manish are unaware about their credit health. Nowadays credit health is considered to be important part of personal finance of every individual. Credit health is considered equally important to your physical health, so people should be credit healthy because “Credit health is real Wealth”.
Source: Secondary

When to check your credit report and improve your credit score?

Whether you are planning to buy a home, a car or even a new credit card, your credit score has immense affect on your loan processing. A credit score is a 3 digit number that shows numeric summary of your credit health. Such score is derived by credit bureaus by analyzing your credit history. The score usually ranges from 300 to 900 points and the higher score suggests more chance of getting approval of your loans. If you are in dilemma to find how to improve credit score, following tips may help you:

ñ      The first and foremost easy action to improve your credit score is to pay off all your bills on time and pay regular installments on your loan default. Even, if your credit score is trembling, you just follow the technique of paying all the bills on time. You need to maintain no late payment status for at-least seven years.

ñ      It is important to put a limit on your credit card use and utilize it only for certain ways. Your credit score would be on the higher side if you will make less use of credit cards as well as will avoid using too many credit cards. The ideal would to be use between 10% and 20% or less of the total credit available.

If you don’t have any idea how to get credit report and improve your credit score, it is better to take help of professional credit agencies. These agencies become your friend and guide in showing you the right way to improve your credit score.
Visit www.cibilconsultants.com and book an appointment now !

Source: Secondary

Follow these guidelines and build your credit

Following a responsible credit life is good financial practice for every individual. You get better chances of getting approved for loan and along with better interest rates. In spite of all this, advantages will appear during renting or buying a house and during employment opportunities, qualifying for a corporate credit card, etc.

Want to build credit? Have patience:
Credit score cannot be changed overnight as they reflect your credit behavior over a period of time. You can’t just improve them in a day- act patiently. The good thing about it is that credit scores concentrate more on present activity so if you have negative information in the past they won’t matter much as they keep on ageing.

Bad credit cannot be erased:
Negative information ruins your credit score because it stains your report for a long time. They may remain on your report from a period of 7-10 years. So try to avoid adding any kind of negative term to your report.

Regular bill payments:
Paying bills regularly doesn't give you any additional points but it certainly does help you build a responsible credit history. In fact if you are not regular and default on your payments, it would hurt your credit score that much.

Use Credit:
The main key to building your credit is using credit in form of credit cards and loans. But this credit should be used in moderation and not be over used. Maintaining a low balance on credit cards and paying off the installments on time is the right way to build your credit. These show how responsible you are with the credit you use and helps boost your score. Having credit lines is also important.

Establish a long history of good responsible credit behaviour and you would build your credit in no time. Credit scores are calculated by the credit bureaus like CIBIL, Equifax etc on the basis of the information provided by various banks and lenders.

Source : Secondary

Restore your CIBIL score this way

Banks and credit card companies use credit scores to determine your credit worthiness and whether to qualify you for a loan. The higher credit score you have, the lower interest rates banks offer you and vice versa. Even some employers check your credit report before giving you the job and even landlords check before signing the lease. That is why, it is of utmost importance to have a good credit score.

Check errors:

Checking your credit score at regular intervals is one of the good financial habit. Most of the times the credit score dropping is cause of errors on the report. If you find errors, contact the bureau as soon as you can and go as per the procedure to rectify it.

Talk to the creditors:
If you are having financial problems, contact your creditors as soon as you can. They can help you with lower interest rates, and counsel you about balance transfers and debt consolidations.

Make your payments:
The hardest part- Try to make pay off all your debts and don’t accumulate any more debt. Turn to cash payments and cut down on your expenses till you pay off your debts.

Your credit score is your emergency financial tool for the future. If you don’t restore your credit it will keep going down and risk your chances of getting a loan in the future.

Source: Secondary

Are home loans new risk area for banks?

Banks are getting more careful in disbursing home loans – picking people with higher credit scores, for example – as property prices rise to unsustainable levels.

“Banks have become prudent and are looking at improving the health of their portfolio,” said Arun Thukral, managing director, Credit Information Bureau (India) Ltd, or Cibil.

“Who they lend to has also seen a major shift,” he said. “Earlier, they were lending to a person with a Cibil credit score of 600-700 to buy a house. Today, 60% of the home loans are given to people who have a score of at least 800.”

Indians are getting more leveraged than they were a decade back as salary increases have not kept pace with spike in home prices, burdening them with larger monthly loan payments. Experts fear that a more leveraged consumer, coupled with inflated home prices, can pose a risk to banks’ balance sheets.

Home prices in the metros have doubled in the last five years despite an economic downturn, according to data released by the National Housing Bank.

“The business is therefore prone to asset quality pressures, particularly if collateral values of the two most popular products – residential mortgage and gold loans – were to fall significantly,” said Ananda Bhoumik, analyst, India Ratings & Research.

Indian banks have changed gears in recent past, sharpening focus on retail loans as credit off-take on the corporate side remains subdued and uncertain. As such, consumer loans are considered a safer option as corporate bad loans soar in the sluggish economy. But there’s no undermining the risk here, too.

“Banks will have to recognise that retail credit comes with its own risks, exposing them to individuals in large volumes as against one corporate loan. The whole appraisal process and risk underwriting process has to recognise that,” said Satish Mehta, co-founder and director at Credexpert, a credit counselling company.

Though the mortgage-to-gross domestic product ratio remains low at 7% in India, most of the loan amount is skewed towards urban India. While no one expects property or gold prices to come crashing down any time soon, credit bureaus recognise the systemic risk.

“If the price of the collateral falls, then the risk that banks are carrying definitely goes up,” said Mohan Jayaraman, managing director at Experian Credit Information Company of India Pvt Ltd. “Due to this, many mortgage lenders are also getting into the theme of saying that they will do smaller ticket lending and the whole affordable housing thing is being taken more seriously now.”

Source: Secondary