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NBFCs reduce exposure to new to credit segment

June 20, 2023

NBFCs reduce exposure to new to credit segment
A number of non-banking financial companies (NBFC) are reducing their exposure to the new-to-credit segment to keep the asset quality stress under check. According to data from TransUnion CIBIL, loan approval rates to new customers fell to 24% as on December 2022 from 35% in December 2020.

Poonawalla Fincorp is largely focusing on existing-to-credit customers as a part of its business strategy. “We are largely focusing on the existing-to-credit segment in line with our risk management process. We will not shift focus away from this segment as the total addressable market is large,” said managing director Abhay Bhutada.
 
The new-to-credit segment comprised 16% of loan origination volume in December 2022, compared with 22% in December 2020. The trend of declining loan approval rate sustained in the March quarter too, with lenders tightening their underwriting standards, especially in the risk-prone unsecured personal loan segment, said experts.
 
The delinquency rate in the personal loan segment was 9% in the December quarter, higher than the pre-Covid level of 5%. Vintage delinquency is calculated as a percentage of accounts of over 30 days past due in six months from origination.
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