Being one of the top lending institutions in the country, Finway has expressed concern regarding the current loan repayment in the country and the mindset of the borrowers. The borrowers’ mindset has changed quite significantly with regards to loan repayment as well as investments – especially since the RBI has announced a three-month extension of the moratorium on loans, i.e. till August 31, 2020.
As a leading NBFC in the country, Finway observed that 45% of all its borrowers have applied for a moratorium PAN India; this behaviour is however, more distinctly noticed in the northern region of the country, in places like Delhi-NCR. Most of the borrowers that have opted for moratorium belong to the middle age group – which means they are either salaried individuals or business entrepreneurs. Depending upon the nature and scale of the lending institution, the outstanding loans that are coming under moratorium are ranging from 30% to 70%.
Not only has there been an increase in the number of borrowers asking for the moratorium, Finway has also observed a sharp fall in the demand of loans. The customers are being reluctant in taking loans or taking any risk in their business; the only thing in their minds right now is to pay the loans back as quickly as possible. They are cutting down the costs drastically, and all they are doing is re-structuring their loans. Most of the NBFCs, in fact, are facing such situations with regard to customers.
The customers are already facing a lot of problems due to pay cuts and layoffs right now, and the majority of them have agreed to not spend any money on the non-essential items for the next few months, till the situation gets a little better.
“There are cases now coming to us, where the customers just want a lower ROI; they don’t want any additional amount. Everybody is playing safe with regards to their borrowing and spending habits. They are unable to pay EMIs and are under tremendous pressure, but in no circumstances they are looking to raise more debt as they already feel the burden. On the contrary, they are liquidating their assets to become debt free,” said Mr. Rachit Chawla, Founder and CEO, Finway.
The Covid-19 pandemic that began as a health emergency has now evolved into a full-blown economic crisis. There is not one sector in the country that has been untouched by this menace. The economic situation has been grim and financial uncertainty has sneaked up on salaried individuals as well as borrowers. Consequently, people who are under the pressure of repayment of loans are going through a very difficult crisis.
“There are some solutions or countermeasures on the table, however that people can follow. Most important thing is to build an emergency corpus for unprecedented financial crises. Expenses also need to be compartmentalized into different categories of needs and wants. Automating savings and investments can save people from going on unnecessary breaks from investing. And lastly, people need to study their finances seriously and plan accordingly. The next few months are going to be rough, but good planning can go a long way,” Mr.Chawla further added.