What happens to loan disbursal policies immediately after recession?
– Do the banks tread a careful path & go slow & stricter in lending
– Do they see the improvements in economy a sign for them to also go bullish in lending
– Most importantly how do they cater to the now-able-to-pay but bad-credit-profile segment of the population
Lemme elaborate on the last point, coz I am really curious to see how this pans out. My underlying assumption is that due to the economic slowdown a lot of consumers would have been “forced” to default on their credit repayments. I say forced-to-default, because I want to leave out those ones which had an intention issue rather than repayment capability issue.
If this segment is substantial & the economic uptrend puts them where they can now repay on time, will the banks now consider them as credit worthy? if not, does it mean that the banks will have to remain satisfied with a smaller universe or look at newer segments (e.g. young salaried professionals without a credit track record). For segments that look promising but do not have a proven repayment track, what recourse do the banks have? Can they leverage payment track on non-loan products (there have been talks about a credit bureau that takes utility & LI payments as feeds apart from the pure loan & card products- will this be helpful)
Also do banks look at their existing portfolio and find pockets in the portfolio where the defaults were lowest & growth potential still exists? Most banks have found their Internet sourced portfolio to be of a higher profile (atleast from a risk perspective) & this continues to be a very small percentage of their overall base. Which means, there is a lot of growth opportunities through the direct channels. But are the banking systems & processes geared up to tap into these opportunities in a meaningful way?
There is a lot of change I foresee in the way business is done in retail banking. What do you think?