Rural loans, small biz see stress rising

Uneven rainfall, higher interest rates take a toll on borrowers

- Shayan Ghosh

Retail borrowers in the countryside and small businesses are finding it harder to make timely loan repayments, lenders said, thanks to an uneven monsoon, sluggish demand recovery, and higher interest rates.

Apart from India’s largest lender State Bank of India (SBI), non-bank lenders such as Bajaj Finance, Cholamandalam Finance, and L&T Finance have pointed to stress pockets in some sectors. Banks and non-bank lenders alike have turned cautious after a lending binge in the past led to an oversupply of credit and higher indebtedness.

On 26 July, Bajaj Finance told analysts that it is seeing increasing leverage even among rural consumers and has taken risk actions in the rural B2C (business-to-consumer) business, leading to muted growth in the first quarter. The non-banking financial company (NBFC) is taking pre-emptive actions to safeguard its balance sheet.

“That is the only thing we are watching for and acting on in a nuanced manner to ensure we stay out of trouble but remain in the game," Rajeev Jain, the managing director of Bajaj Finance, told analysts on 26 July.

L&T Finance is seeing fault lines develop in loans to first-time borrowers of unsecured credit and in the less-than ₹50,000 category of unsecured loans, chief executive Dinanath Dubhashi told analysts on 20 July.