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Indian banks are expected to have steady growth in earnings and returns over the next 3–4 years, according to a recent report by Jefferies. It expects a 13% compound annual growth rate (CAGR) in loan growth for banks between FY24 and FY27, helmed by a supportive environment and expected adjustments in interest rates. "We expect steady growth in earnings and stable returns, Over FY24-27, the banks we cover should see 13% CAGRin loans We factor 25-50 bps cut in rates, &amp; depending on timing, NIMs will move," the report said. Depending on the timing, these rate cuts could impact banks' <keyword id="20076541" type="General" weightage="20" keywordseo="net-interest-margins" source="keywords">net interest margins</keyword> (NIMs), which measure the difference between interest income generated and interest paid to depositors. The report also notes that banks' net interest income (NII), a critical metric that is reflective of how much a bank earns from its lending, could grow at a steady 12% CAGR, which would support overall earnings growth. <h2>Rate cuts probable next year</h2>Per SBI Mutual Fund's monthly outlook for November 2024, while markets were initially speculating possible rate reductions in December this year or February next year these chances now stand dampened due to two reasons. First, elevated CPI numbers in September, which stood at a nine-month high, underlined the stickiness of food inflation. Secondly, RBI governor Das recently highlighted his hawkish stance at a conference, stating that "rate cuts at this stage would be premature and risky’. The report further adds that February 2025, or even April, would be a better time to discuss repo rate cuts in India. Even <keyword id="19985925" type="General" weightage="20" keywordseo="bank-credit-growth" source="keywords">bank credit growth</keyword> has continued to outpace deposit growth for two years now. However, they seem to be inching closer in the recent past. For instance, in October 2024, while bank credit growth remained at 12.7%, the deposit growth rate followed closely at 11.8%. This also means that banks are witnessing an elevated bank credit-to-deposit ratio, standing at 77% in October. <h2>Risks in unsecured lending </h2>However, Jefferies noted some areas of caution that could influence growth in other revenue streams, particularly fees. Growth in fees may be at risk due to expected declines in the disbursal of unsecured loans, which generally carry higher interest rates and generate higher fees for banks. October saw stress and defaults rising in the unsecured lending space, prompting the RBI to intervene. As a result, unsecured loans by banks have only grown by 12.1%, the lowest since the pandemic. Despite these risks, the report expects banks' return on assets (ROA) and return on equity (ROE) to remain healthy, underscoring the sector's stable profitability potential. The report also highlights that while the Nifty Banks index has risen by 19% over the past year, it has still underperformed the broader Nifty index, which delivered 27% returns in the same period. BSE Bankex has been along similar lines, generating returns worth 19% over one year. While the Nifty banks' index has a YTD (yield to date) of 7.63%, it continues to trail Nifty's YTD of 11.30%

Indian banks to have steady growth in earning over next 3-4 years, fees from unsecured lending may dip, notes Jefferies report

The Indian <keyword id="22196321" type="General" weightage="20" keywordseo="credit-card-industry" source="keywords">credit card industry</keyword> is struggling to grow, as new issues slow down on a year-on-year (YoY) basis. Not only has the growth i.e. issuance of new credit cards slowed down, but lenders are also becoming increasingly cautious of the asset qualities, a recent report by Nomura showed. From 19% in July 2024, the growth in the <keyword id="6368202" type="General" weightage="20" keywordseo="credit-card" source="Orion">credit card</keyword> spendings came down to 13% in August 2024. The year-to-date (YTD) growth has also significantly declined in FY25, currently standing at 17%, markedly down from 28% in FY24. For the fifth consecutive month, the number of new credit cards added to the system remained well below the 1-million, or 10 lakh mark. Around 9.2 lakh credit cards were added during the month, a slight uptick from the 7.55 lakh cards that came into the system In July 2024. However, there is growth in this space nevertheless, with about 10.55 crore active credit cards at present, marking a 15.6% YoY increase. Even the annualised spend per card, or the average amount spent via an annual card during an year grew 1% YoY to Rs 1.87 lakh. But this was far less than the 7% growth annual spends via one credit card saw in FY24. Meanwhile, what continues to burgeon consistently is the outstanding amount on these credit cards, which ballooned to Rs 2.7 lakh crore in June 2024, up from Rs 2.6 lakh crore in March 2024, and around Rs 2 lakh crore in the year ago period. To put this in perspective, pre-pandemic, the total outstanding amount stood at Rs 87,686 crore, which marks a 24% CAGR in this amount, in just a span of 5 years. <h2>Large drops, slowdown to sustain</h2>Even the monthly expenditure per card dropped 2% YoY to Rs 16,000 in August, 2024. Subsequently, the transaction volume via credit cards also dipped to 1.6% in August, along with the total amount of <keyword id="21084888" type="General" weightage="100" keywordseo="credit-card-spending" source="keywords">credit card spending</keyword>, which fell to Rs 1.69 lakh crore in August, from Rs 1.73 lakh crore in July. Also, there has been a hefty cutdown in provisions made for credit card reward points, which reflects in the quantum of credit card benefits that have been mowed out by companies of late, making credit cards far less lucrative than before. <h2>HDFC takes lead </h2>During August 2024, <keyword id="19895995" type="General" weightage="20" keywordseo="HDFC-Bank" source="keywords" meta.keywordsubtype="org" meta.entityname="HDFC Bank" meta.hostid="261" meta.entityid="HDFC Bank">HDFC bank</keyword> added a total of 2.41 lakh credit cards, taking its total tally of active credit cards to 2.19 crore. <keyword id="19900482" type="General" weightage="20" keywordseo="ICICI-Bank" source="keywords" meta.keywordsubtype="org" meta.entityname="ICICI Bank" meta.hostid="261" meta.entityid="ICICI Bank">ICICI Bank</keyword> came a second distant, adding 1.45 lakh credit cards during the month, which means that the second-largest credit card issuer now holds over 1.75 crore active credit cards. Axis Bank and SBI Cards also added 1.27 lakh and 1.1 lakh cards, respectively to their repertoire during the month, while the growth numbers at Kotak Mahindra Bank remained largely flat, stagnating the bank's total card tally at 54.13 lakh. This was due to the ongoing ban on the bank due to its weak IT infrastructural issues imposed by RBI in April 2024. If anything, the bank's number of credit cards declined by 61,191 during the month. Even as the festive season approaches, experts think that it is unlikely to make a major dent in credit card spendings, which are expected to see a further slowdown in the quarters to come.

Credit card growth experiencing a slowdown, as borrowers struggle to pay back loans

New Delhi: As the earnings season for the second quarter of FY25 unfolds, <keyword id="19959986" type="General" weightage="20" keywordseo="public-sector-banks" source="keywords">public sector banks</keyword> (PSBs) are expected to see a slight dip in profits compared to the previous quarter, according to a report by <keyword id="19896146" type="General" weightage="100" keywordseo="Motilal-Oswal" source="keywords" meta.keywordsubtype="org" meta.entityname="Motilal Oswal" meta.hostid="153" meta.entityid="Motilal Oswal">Motilal Oswal</keyword>. The report estimates that PSBs' Profit After Tax (PAT) will decline by 0.6 per cent quarter-on-quarter (QoQ), while showing a stronger year-on-year (YoY) growth of 17.2 per cent. "We estimate PSBs to report moderate <keyword id="19899597" type="General" weightage="20" keywordseo="earnings-growth" source="keywords">earnings growth</keyword> of 17.2 pc YoY/ a decline of 0.6 pc QoQ in 2QFY25," the report stated. The slower pace of growth can be attributed to flat net interest margins (NIMs) and a slight increase in loan loss provisions (LLP). The <keyword id="20171160" type="General" weightage="20" keywordseo="Net-Interest-Income" source="keywords">Net Interest Income</keyword> (NII) for PSBs is expected to grow by around 6 per cent YoY, although interest margins are likely to remain under pressure. Despite these near-term challenges, the report suggests that public sector banks are on track to post a compound annual growth rate (CAGR) of 15 per cent between FY24 and FY26, pointing to sustained long-term growth. In the private sector banking space, the report forecasts mixed results for the same quarter. For private banks under the coverage, Pre-Provision Operating Profit (PPoP) is expected to grow by 12 per cent YoY and 1 per cent QoQ. However, PAT growth is predicted to be more modest, increasing by 5 per cent YoY and 0.6 per cent QoQ. "For our private bank coverage universe, we estimate a PPoP growth of 12 pc YoY/1 pc QoQ and a PAT growth of 5 pc YoY/0.6 pc QoQ in 2QFY25," the report added. Looking ahead, private sector banks are expected to experience steady profitability growth, with earnings projected to grow at a CAGR of 12.4 per cent over FY24-FY26. Overall, while both public and private sector banks may face moderate growth in the second quarter due to margin pressures and higher provisions, their long-term earnings prospects remain positive. (ANI)

Profit of public sector banks expected to decline by 0.6 percent QoQ : Motilala Oswal

India's <keyword id="22879519" type="General" weightage="20" keywordseo="organised-gold-loan-market" source="keywords">organised gold loan market</keyword> is projected to double in the next five years to Rs 14.19 lakh crore despite expected moderation in growth due to stricter regulations, according to a <keyword id="19938520" type="General" weightage="20" keywordseo="PwC-India" source="keywords" meta.keywordsubtype="org" meta.entityname="PwC India" meta.hostid="153" meta.entityid="PwC India">PwC India</keyword> report. In fiscal 2023-24, the organised <keyword id="21627536" type="General" weightage="100" keywordseo="gold-loan-market" source="keywords">gold loan market</keyword> demonstrated substantial growth, reaching a valuation of Rs 7.1 lakh crore, according to the report titled 'Striking gold: The rise of India's gold loan market' . "It is expected to reach around Rs 14.19 lakh crore by FY 2029 at a five-year CAGR of 14.85 %," it said. Indian families own massive quantities of gold, estimated at 25,000 tonne. Existing gold holdings with <keyword id="19895507" type="General" weightage="20" keywordseo="Indian-households" source="keywords">Indian households</keyword> are valued at roughly Rs 126 lakh crore, the report said. It further said the gold loan market is poised to see moderate growth over the next two years, as gold lenders are facing increased scrutiny from regulatory authorities regarding loan-to-value (LTV) maintenance and auction-related procedures. "The second-largest player in the gold loan market being inactive would have an impact on market growth in FY25," the report said. Also, the <keyword id="19899808" type="General" weightage="20" keywordseo="rbi" source="keywords">RBI</keyword>'s advisory to <keyword id="19938300" type="General" weightage="20" keywordseo="NBFCs" source="keywords">NBFCs</keyword> on cash disbursement, which limits the amount of cash disbursal to Rs 20,000, could push customers to rely on the unorganised sector. The regulator has also raised concerns about the evaluation process for lending activities through fintech startups. The increased regulatory scrutiny and revised guidelines have led to a dip in the share prices of leading NBFCs, PwC said. "Gold loan lenders are expected to use this period to ensure that they are compliant with all regulatory guidelines while undertaking several measures to optimise their middle and back offices through digitisation initiatives," it said. Lenders are also expected to implement cost optimisation initiatives that will help drive up the bottom-line profitability of their companies and enhance investor confidence which has slightly depleted as a result of the regulatory scrutiny. Furthermore, the report said rising gold prices over the past financial year may also drive lenders to take a cautious approach to lending rates and pricing as any downward movement in gold prices will result in a substantial LTV breach that will further create operational issues for lenders in the form of auctions. "The growth of the gold loan market is expected to be steered by both banks and NBFCs," the report said. The emergence of digital gold loan aggregator platforms and their strategic collaboration with gold loan lenders such as banks and NBFCs will be a key driving factor for the growth of the industry, enabling gold loan lenders to tap into a previously untapped segment of digitally savvy customers. "While the forecasted growth of the gold loan market means potential growth for all players, the impact on the players may vary. Banks are expected to benefit from their lower interest rates," PwC said. Jaikrishnan G, Partner (Financial Services), PwC India said lending against gold is the oldest form of credit. It remains one of the most attractive options for consumer as well as lenders. "High return-on-assets, manageable risk, timely regulatory interventions, growing adoption, tech-enabled operating models have all contributed to sector growth. As India embraces the vision of Viksit Bharat, gold loans will provide much needed liquidity and credit access to growing small and medium entrepreneur segments," he said. The report further said growth by NBFCs is expected to be fuelled by their expansion and increased outreach to regions with low penetration, bringing new credit customers to the financial services ecosystem. Also, fintechs will play a critical role in bringing in the required technology and innovation into the industry, thus helping lenders to create unique product propositions to boost growth, it said. <keyword id="20037818" type="General" weightage="20" keywordseo="South-India" source="keywords">South India</keyword> contributes to a vast extent, as it emerges as the dominant market for gold loans, with 79.1% share of the total outstanding loans. The report also noted that an assumption can be made that the entire Rs 126 lakh crore worth of gold will not be available for pledging due to various reasons like jewelry belonging to religious institutions, jewellery with emotional value, and certain jewellery held by individuals who are not in need of finance.

Gold loan market projected to double in 5 years to Rs 14.19 lakh crore, says PwC India's report

<ul><li>RBI tightens capital norms for lenders disbursing unsecured loans like <keyword id="35520" type="General" weightage="20" keywordseo="personal-loans" source="Orion">personal loans</keyword>, credit card receivables.</li><li>Experts say that the central bank aims to stem unsecured loan growth which has been growing at 26% for the last five years.</li><li>The move might also have a spillover effect on fintechs who aggressively push <keyword id="9522245" type="General" weightage="20" keywordseo="bnpl" source="Orion">BNPL</keyword> schemes.</li></ul>The Reserve Bank of India tightened capital norms for lenders disbursing unsecured loans to unsuspecting borrowers on Thursday evening and there is a rationale behind this move. Given the slowdown in corporate loans, banks have been chasing retail customers for loans. Such has been the rush to offer loans that top-ups are being offered even on auto loans which is just a camouflaged unsecured credit. For example, Suresh Chandra (name changed) had a ₹15 lakh car loan that had to be paid off in 12 months. Before he could repay his existing auto loan, he was being inundated by banks and NBFCs luring him into taking more loans. A large private bank offered him a top-up loan that’s akin to the value of his car, and another wanted to offer a loan that was 150% of the part of the loan that had already been paid off. “Sometimes I get tempted to take up on these offers. Also because technically auto loan interest is lower and they’re offering the top-ups at the same rate. If I need money, I will surely take this up instead of a new personal loan,” Chandra told Business Insider India. Giving a top-up loan is a good way for banks and NBFCs to push across new loans to borrowers. A top-up loan is an additional credit that’s given over and above an existing loan and when opting for a balance transfer. It doesn’t come with end-use restrictions and requires minimum documentation. Now, India’s central bank has cracked down on lenders to stall this aggressive loan push to consumers on Thursday by tightening capital norms. Not only has it classified top-up loans as unsecured loans, it also increased risk weight on unsecured loans like personal loans, credit card receivables, consumer credit and more such. It will make it tougher for them to give out loans as easily and freely to consumers. RBI puts up a ‘STOP’ sign Banks and NBFCs have been giving out too many unsecured loans. Unsecured retail loans have been growing at a 26% compounded annual growth rate (CAGR) between FY18 to FY23, as per Nomura. In FY18, unsecured retail loans were 7.8% of bank credit and now they’re as high as 10.6%. All this has happened by chasing after consumers for loans. “We view this as a clear signal from the regulator that it wants to bring down the strong growth in these segments, which is being brought into effect by bringing about an increase in the effective cost of capital for lending to these segments,” says a report by Nomura. Experts say that RBI’s move will control the increasing delinquencies and high risks associated with lending in the unsecured loan segment. Due to increased risk weightage, lenders should have to cover for more credit risk in the unsecured loan segment and it will make lending more expensive. The loans will also turn more expensive for borrowers. “RBI has been cognizant of the high increase in unsecured lending and initial delinquency trends seen in the unsecured loan segment. While this might look like a small piece in the overall picture, the RBI is cautious enough to take an early step in controlling the same,” says Ameet Venkeshwar, chief business officer at LoanTap. The credit standards will also get tighter, experts hope. Most top banks offer personal loans at interest rates ranging between 10-26% depending on creditworthiness. These loans can go as high as ₹20 lakh and the minimum income limit has to be ₹30,000 to become eligible for such loans. Personal loan interest rates and processing fees <table style="border-width: initial; border-style: none;" class="redcator-table-advance"></colgroup><tbody><tr><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">Lender </td><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">Interest Rate p.a. </td><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">Processing Fee </td><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">Loan tenure </td></tr><tr><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">HDFC BANK </td><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">10.5-21% </td><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">Up to 2.5% </td><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">12-60 months </td></tr><tr><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">ICICI BANK </td><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">10.5-16% </td><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">Up to 2.5% + GST </td><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">Up to 60 months </td></tr><tr><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">HOME CREDIT CASH LOAN </td><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">24-34% </td><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">2.5-5% </td><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">Up to 48 months </td></tr><tr><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">ADITYA BIRLA CAPITAL </td><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">14-26% </td><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">Up to 2% </td><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">12-72 months </td></tr><tr><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">AXIS BANK </td><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">10.49-22% </td><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">Up to 2% </td><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">Up to 60 months </td></tr><tr><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">SBI </td><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">11.05-14.05% </td><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">Up to 1.5% </td><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">Up to 72 months </td></tr></tbody><tbody></tbody><tbody></tbody></table>Source: Bank websites and Bankbazaar Thou shall not tempt The free flow of personal loans has been pushing credit culture in the country. Preeti Mishra, a professional from Mumbai has a similar story. “I swiped as much as ₹50,000 on my debit card to pay my child’s school fees. Immediately, I got a call from my bank offering to convert that payment into a loan which can be paid off in installments. Why would I want to take a loan which I can afford to pay?” she says. Like Chandra, she also says that it’s fairly tempting. “Even if I was in a tad bit of a money crunch, I would have taken up the loan. And, in the long run, it would have made it tougher for me,” she worries that one bad day she might actually fall into a trap. Sumanto Roy is one such who has fallen into it, and now swimming at the deep end. The 27-year-old earns ₹60,000 per month. He already has a car loan that takes away ₹10,000 per month, another ₹8,000 as EMI for his phone and another ₹12,000 goes off his bank account every month as his laptop EMI. If Roy wasn’t living with his parents, he would have found it very tough to get by with this loan burden. “It’s difficult to pay off my credit card bill every month. I roll it over by making the minimum payment. Now, I am saving and trying to pay off my dues as fast as possible,” he tells Business Insider India adding that the loan burden is distressing him personally. Will BNPL hold on? However, banks and NBFCs are one side of the aggressive loan push story. There is a rising number of Buy Now Pay Later startups, companies that integrate EMIs while checking out of e-commerce websites, and VC-funded startups that loan for people who borrow to go on a holiday or a date. Experts believe that RBI’s move might change the dynamics of some of these fintechs to some extent. Jefferies expects PayTm’s consumer loan disbursal growth to normalize from around 90% in FY24 to 40% in FY25 and 35% in FY26. “For Paytm's lending partners, higher funding costs and increased capital requirements will affect product profitability in BNPL/PL. They may respond by tightening credit standards and/or moderating growth from elevated levels right now,” Jefferies says. Giving loans is a good business in today’s world where GenZs, especially are focussed more on ‘experiences’, want to live the good life. On the other hand, the new-age apps advertise in a buzzing manner day in and day out with taglines like — ‘Download, pay your credit card bills and earn rewards’. The lure of loan was always there. At the end of the day, lenders are different when you take the loan, and when it’s the time to pay up. Sooner or later, they would want their pound of flesh right at the heart. SEE ALSO <a href="https://www.businessinsider.in/business/news/wine-vs-tea-indias-consumption-trends-show-a-sharp-divergence/articleshow/104810168.cms">Wine vs Tea: India’s consumption trends show a sharp divergence</a> <a href="https://www.businessinsider.in/business/news/bitten-by-inflation-indians-buying-fewer-clothes-this-season/articleshow/105179140.cms">Bitten by inflation, Indians buying fewer clothes this season</a>

The dark truth behind RBI’s crackdown on easy personal loans

<ul><li>The government’s Open Network for Digital Commerce (<keyword id="5862596" type="General" weightage="20" keywordseo="ondc" source="Orion">ONDC</keyword>) initiative, which seeks to democratise e-commerce, is seen aiding increased digital adoption by <keyword id="6393272" type="General" weightage="20" keywordseo="msmes" source="Orion">MSMEs</keyword>.</li><li>As per RedSeer, India MSME digital services market is set to grow 6x in the next five years.</li><li>The <keyword id="118240" type="General" weightage="20" keywordseo="MSME-ministry" source="Orion">MSME ministry</keyword> plans to boost MSME contribution to the GDP to 50% by 2025.</li></ul>Digitalisation is playing a crucial role in accelerating growth in the Indian micro, small and medium enterprises (MSME) sector. And the government’s Open Network for Digital Commerce (<keyword id="5862596" type="General" weightage="20" keywordseo="ondc" source="Orion">ONDC</keyword>) initiative, which seeks to democratise e-commerce, is likely to spur increased digital adoption by <keyword id="6393272" type="General" weightage="20" keywordseo="msmes" source="Orion">MSMEs</keyword>, says a report by Elara Securities. The report also shared a survey finding (published in June 2021) conducted by Bluehost, a web hosting solutions provider, that said Indian MSMEs are rapidly adopting digital payments over cash – 72% of payments were through the digital mode compared while cash transactions accounted for 28%. Not only are new small businesses embracing digitalisation, more and more existing MSMEs are going digital too. This is, however, far short of that achieved in countries like the US and China. The percentage of Indian MSMEs that turned online grew from 32% in FY16 to 55% in FY20, as per data from RedSeer. “To compare, in the US, 54% of small businesses used emails in 2017 and in China, 89% of the MSMEs were already digitally connected by 2015. This indicates significant growth headroom in terms of digital connections in India alone,” said a report by Elara Securities, adding that currently only 4% of MSMEs are truly digitally engaged, the report said. As per RedSeer, India’ MSME digital services market is set to grow six times in the next five years, taking the market opportunity from $1.5 billion to $9 billion by FY25, at a CAGR of 43%. About 73% of the growth is estimated to come from a surge in the number of digital businesses and 27% from higher average spend on digital services. ONDC to build digital backbone for MSMEs Covid forced many MSMEs to embrace digital. Now, there is a larger incentive for small businesses to go digital thanks to the government’s Open Network for Digital Commerce (ONDC) initiative. It provides opportunities for small businesses to grow via e-commerce, by connecting them with network partners – taking products digital. “ONDC is expected to expand the user base for all digital/e-commerce apps/platforms in a way similar to UPI, which revolutionised the payment industry and increased the overall usage of online payments,” said the Elara Securities report. The platform will make it easy for small businesses to take their service portfolio online and become digitally relevant to their customers. “With such growth headroom, ONDC may bring in more and more MSMEs into e-commerce’s fold and accelerate the shift from offline to online,” Elara said. There were 80.16 lakh registered MSMEs as on March 31, 2022 – contributing close to 26% to India’s gross domestic product (GDP). The sector generates about 12 crore jobs across industries/regions and is a major wealth creator at the grassroot level, as per the report. The <keyword id="118240" type="General" weightage="20" keywordseo="MSME-ministry" source="Orion">MSME ministry</keyword> plans to boost its contribution to the GDP to 50% by 2025. It also aims to double the number of MSMEs in the next five years with a focus on high-growth industries. “The sector holds immense potential in supporting India’s ambitious vision of a $40 trillion economy by 2047,” says a recent report by industry body Assocham. Improving credit growth Apart from the digital push, the government has been putting in all efforts to aid the sector’s quick growth through nuanced policy support. “Rural demand traction, improving MSME credit growth and manufacturing revival and supportive government/RBI policies are enabling a prolific seedbed for MSMEs,” said the report by Elara Securities. To give the sector a further boost, industry body <a href="https://www.businessinsider.in/business/news/reit-like-structures-loans-against-gst-filings-can-help-solve-msme-fundraising-problems-assocham/articleshow/98518295.cms">Assocham recommended that banks </a>can fund MSME working capital requirements against GST filings. “Banks could fund working capital requirements against GST filings, which are more reliable quantitatively, as compared to collateralized loans. This would not only enable MSMEs easy access to funds but also spur formalisation through GST registrations,” Assocham said. The industry body also added that the government could come up with a structure similar to real estate investment trusts (REITs) and infrastructure investment trusts (InVITs) to lend specifically to MSMEs via pooling funds. SEE ALSO: <a target="_blank" class="c-link c-message_attachment__title_link" href="https://www.businessinsider.in/careers/news/first-82-days-of-2023-see-more-layoffs-than-the-entire-2022/slidelist/98960848.cms">First 82 days of 2023 see more layoffs than the entire 2022</a> <a target="_blank" class="c-link c-message_attachment__title_link" href="https://www.businessinsider.in/business/startups/news/16-startups-have-laid-off-100-percent-employees-in-2023-so-far-3-of-them-in-india/slidelist/98941663.cms">16 startups have laid off 100 percent employees in 2023 so far – 3 of them in India</a>

Digitalisation, credit growth, government policies to drive MSME growth, say experts

<ul><li>Indian companies will likely have to contend with the fact that <keyword id="1384155" type="General" weightage="100" keywordseo="wfh" source="Orion">WFH</keyword> is here to stay. </li><li>A new report by <keyword id="13222" type="General" weightage="80" keywordseo="sbi" source="Orion">SBI</keyword> has revealed that thanks to WFH’s popularity, Indians are increasingly obtaining home loans in Tier 3 and Tier 4 districts. </li><li>As a result, housing demand and prices have also increased at a faster pace when compared to Tier 1 and Tier 2 districts. </li><li>Women home loan borrowers also account for half of fresh disbursals in the top 20 districts in T3 and T4 districts. </li></ul>The boom in Work from Home in the post-pandemic era is now reflecting in home loan growth, according to a report by State Bank of India. While companies in India and around the world are increasingly demanding their employees to return to offices, it looks like at least some of them have decided to set up offices in their homes. “Working from Home is redefining the priorities as households are shifting into digital offices within their own homes in Tier 3 and Tier 4 districts,” the report by SBI said. The report further adds that this has not only led to the growth in loans being faster in T3 and T4 districts, even the average loan sizes have increased much more when compared to Tier 1 and 2 districts between FY19 and FY22. Overall, home loans have grown at a compounded annual growth rate (CAGR) of 11% since FY19, but T3 and T4 districts have grown at a faster pace of 12-13%. “As the pandemic forced buyers to reassess the work-life balance, cities having better infrastructure connect have found renewed interests from new-gen buyers whose digital lifestyle enables them to connect to work from anywhere,” the report adds. <div type="Article" hostid="261" msid="94220904" title="For every ₹100 pulled out by foreign investors from the Indian equity markets, domestic investors have ploughed back ₹89 this year" mstype="2" mssubtype="0"></div> <cmsannotation type="cmsannotation" annotationid="Housing demand and prices are increasing at a much faster rate, too" comment="subhead" text="Housing demand and prices are increasing at a much faster rate, too">Housing demand and prices are increasing at a much faster rate, too</cmsannotation> T3 and T4 districts are shining in other areas, too – according to the report, both housing demand and prices are growing at a much faster rate. “Many tier-2 cities including Visakhapatnam, Guwahati, Raipur, Surat, Vadodara, Jaipur, Lucknow, Dehradun and tier-3 city Coimbatore have witnessed higher growth in housing prices,” the report said. It attributes this growth to an increasing trend of WFH and freelance jobs. Women account for nearly half of the loans in the top 20 districts. In fact, two districts – Dang in Gujarat, and Arwal in Bihar stand out where 86% and 75% of fresh loans were sanctioned to women, respectively. A couple of reasons for this could be the additional subsidies of up to 0.1% on interest and the simpler eligibility criteria, making home loans an attractive proposition for women. <cmsannotation type="cmsannotation" annotationid="Fresh disbursals to T3 and T4 districts also register growth" comment="subhead" text="Fresh disbursals to T3 and T4 districts also register growth">Fresh disbursals to T3 and T4 districts also register growth</cmsannotation> The share of T3 and T4 districts in fresh disbursals has also registered growth between FY19 and FY22, the report says – together, T3 and T4 districts account for 36% of fresh disbursals in FY22, up from 32% in FY19. More specifically, Uttar Pradesh, Karnataka and Punjab top the list when it comes to growth in fresh disbursals – 6 districts of UP, and 5 districts of Karnataka and Punjab each figure amongst the top 20 in T3 and T4 categories. One of the reasons for the growth in UP, specifically, is the launch of the SVAMITVA scheme by the Indian government wherein rural people are given the right to document their residential properties so that they can use their property for economic purposes. Essentially, this scheme enables rural people to document their properties and then use them for obtaining loans and other financial benefits. So far, 20.8% of villages in UP have been covered, and that seems to have had an impact on fresh loan disbursals already. <div type="Article" hostid="261" msid="94388449" title="Reliance New Energy picks up 20% stake in Caelux to shore up its position in advanced solar tech" mstype="2" mssubtype="0"><payload><![CDATA[seealso]]></payload></div> <div type="Article" hostid="261" msid="94366341" title="The Adani effect: Ambuja Cements rallies 40% in one month – analysts suggest good days ahead for the cement industry" mstype="2" mssubtype="0"><payload><![CDATA[seealso]]></payload></div> <div type="Article" hostid="261" msid="94304653" title="Story in charts: How Indian equity, gold and debt investments have performed over the past two decades" mstype="2" mssubtype="0"><payload><![CDATA[seealso]]></payload></div>

Home loans growing at a faster rate in Tier 3 and 4 districts, thanks to WFH: SBI report

<ul><li>Indians are taking more personal and <keyword id="1897540" type="General" weightage="20" keywordseo="consumer-durable-loans" source="Orion">consumer durable loans</keyword>, boosting the overall growth of retail credit in the country.</li><li>Personal and consumer durable loans almost doubled between FY19 and FY22, despite a lull for two years due to Covid-19.</li><li>Tier 2 and lower cities and districts have joined the party, with home loans seeing a surge in these areas due to WFH.</li></ul>Indians are taking more <keyword id="35520" type="General" weightage="100" keywordseo="personal-loans" source="Orion">personal loans</keyword> and buying consumer products on credit than ever before, according to a new report by credit bureau <keyword id="2509365" type="General" weightage="80" keywordseo="crif-high-mark" source="Orion">CRIF High Mark</keyword>. Personal loans, consumer durable loans and business loans carry relatively higher risk for lenders, when compared to home and auto loans. Despite this, personal and consumer durable loans grew at a high CAGR of 25% between FY19 to FY22 – almost doubling in this period, according to a report by Kotak Institutional Equities. Overall, the total lending market in India stood at ₹174.3 lakh crore in FY22, with the retail segment accounting for 48.9% of it. While the overall lending market grew 11.1% in FY22, it has capped off the sluggish growth in FY20 and FY21 – two years highly impacted by Covid-19 and the lockdowns. “FY22 witnessed tremendous growth in new loan originations across retail, microfinance and commercial loans. This resurgence in the credit landscape signals economic recovery and is extremely encouraging,” said Sanjeet Dawar, Managing Director, <keyword id="2302542" type="General" weightage="20" keywordseo="CRIF" source="Orion">CRIF</keyword> High Mark. <cmsannotation type="cmsannotation" annotationid="Economic recovery sounds good, so why are personal loans surging?" comment="subhead" text="Economic recovery sounds good, so why are personal loans surging?">Economic recovery sounds good, so why are personal loans surging?</cmsannotation> An economic recovery sounds like a positive development, but the surge in personal and consumer durable loans might also be hinting at another problem. A surge in these two loan segments suggests people are conserving cash, so they are taking loans and buying products on EMIs to ensure they have enough liquidity. On a positive note however this also suggests two other things – there is a revival in consumer demand, and that people are optimistic about their cash flows, giving them the confidence that they can repay loans on time. “Early warning indicators are at a comfortable level today across all loan segments. Delinquency levels in high-risk segments like consumer durables, personal loans and credit cards are also at a comfortable level today, indicating no reason to be concerned today,” the Kotak report added. This means that both lenders and borrowers are placed securely, and overdue loans are within a comfortable range. <cmsannotation type="cmsannotation" annotationid="Revenge shopping is adding to the surge – and Tier 2+ cities are joining the party" comment="subhead" text="Revenge shopping is adding to the surge – and Tier 2+ cities are joining the party">Revenge shopping is adding to the surge – and Tier 2+ cities are joining the party</cmsannotation> Another factor at play is revenge shopping – lockdowns and Covid-19 restrictions resulted in muted festivities for two years, but everything has opened up in 2022.<a href="https://www.businessinsider.in/business/ecommerce/news/online-festival-sales-likely-to-be-28-higher-than-pre-covid-levels-at-11-8-billion-report/articleshow/94076810.cms"> Experts believe online festival sales could be 28% higher</a> than pre-Covid levels, which suggests that people are itching to shop. Joining the party are people from Tier 2, 3 and 4 cities. “We are forecasting 4x growth in the number of online shoppers from 2018. This growth has been driven by accelerated digital adoption and increasing penetration in Tier 2+ cities,” said Sanjay Kothari, associate partner, Redseer Strategy Consultants. Better yet, this surge is not limited to personal or consumer durable loans – home loans, which have much higher ticket sizes and are relatively less risky than personal loans, have also seen an increase in T3 and T4 districts. According to a<a href="https://www.businessinsider.in/finance/news/home-loans-growing-at-a-faster-rate-in-tier-3-and-4-districts-thanks-to-wfh-sbi-report/articleshow/94393267.cms"> report by SBI</a>, T3 and T4 districts account for 36% of fresh disbursals in FY22, up from 32% in FY19 – thanks to a boom in Work from Home, freelance jobs, and a renewed focus on work-life balance. SEE ALSO: <a href="https://www.businessinsider.in/finance/banks/news/credit-suisse-is-in-trouble-but-this-is-not-2008-investors-remain-wary-of-the-all-is-well-soundbites/articleshow/94641570.cms">Credit Suisse is in trouble, but this is not 2008 – investors remain wary of the ‘all is well’ soundbites</a> <a href="https://www.businessinsider.in/business/auto/news/auto-sales-remain-buoyant-in-september-with-reports-of-a-good-festive-season-ahead/articleshow/94622721.cms">Auto sales remain buoyant in September with reports of a good festive season ahead</a> <a href="https://www.businessinsider.in/stock-market/news/heres-all-you-need-to-know-about-suzlon-energys-1200-crore-rights-issue-after-founder-tulsi-tantis-death/articleshow/94617068.cms">Here’s all you need to know about Suzlon Energy’s ₹1,200 crore rights issue after founder Tulsi Tanti’s death</a>

Indians are taking more personal loans, buying consumer goods on credit, says report

Currently, one-third of India's population reside in cities and it is estimated to go up to 50 per cent by 2030. There is a steady rise in the number of households with a shift towards nuclear families and increased urbanisation. The 66 per cent young population - below 35 years of age, are emerging as young millennial borrowers of home-loans. It is also true that home-loans market is driven by young borrowers within the age group of 26-35 years - about 25 per cent and also by people in the age group of 36-45 years - about 28 per cent. These are all active home-loan audience and jointly account for 53 per cent of annual originations. The average ticket size of a home-loan of young borrowers has continued to increase over the last 5 years, with a CAGR of 6.2 per cent. The ticket size continues to increase more for women than men. The cumulative active home-loan base of these borrowers has seen continuous growth over the last 3 years at a CAGR of 3.5 per cent. These young borrowers have been the reason for change in the home-loan market. Within the affordable segment, volume growth in home-loans of Rs 15-35 lakh, over the last 4-5 years, indicate shifting preferences of buyers towards higher ticket sizes. Rural Housing demand for mid-range and higher ticket sizes has continued to increase over the last 5 years too. Share of annual originations (volume) of Rs 35-75 lakh ticket size has increased by 4 per cent in the last 5 years. Share of annual originations of Rs 75 lakh plus ticket size has increased from 0.37 per cent to 0.87 per cent in the last 5 years. Share of annual originations of Rs 15 lakh ticket size has declined over the last 5 years, largely due to falling demand for very small ticket size segment of Rs 2 lakh. The dearth of disposable income has been a deterrent factor for salaried class towards taking home-loan and buying real-estate. Since the input cost in real-estate has increased the rates, the salaried class is left with no other option but to approach for home-loans from financial institutions. Interestingly, the tenure of repayment of home-loan is fluctuating between 11-30 years. There is also a deterrent factor for salaried class in home-loans and EMIs. The EMIs are no more supportive since the financial institutions first draw larger part of interest in the EMIs and principal component is kept less in more than first 50 per cent of the EMIs. As the EMIs near completion, the interest component becomes negligible and principal component is much higher. Even if the buyer has the provision of pre-payment of home-loan, he ends up paying the larger portion of principal amount rather than saving on the interest. Further, the financial institutions also levy heavy fees on pre-closure of loans. In case the buyer opts for higher tenure for loan repayment, it then makes it difficult for the buyer to invest in second property. One question that has been asked frequently is - "If the principal and interest amount are predefined, why the EMIs can't have equal amount throughout the tenure." Coming to tax benefit, repayment of principal amount in a home-loan qualifies for deduction under section 80C, which has an upper limit of Rs 1.50 lakh per annum. Since the same section - 80C, accounts a number of other investments including PF, PPF and life insurance policies etc, it becomes impossible for a buyer to take advantage of any benefit out of this section. Buyers are looking forward to increase in this limit in Union Budget-2022 since this limit has not been increased in last many years. On the tax benefit for interest payment, since under section 20(b) of the Income Tax Act, there is a cap of Rs 2 lakh per annum on the interest part of the home-loan, home-loans being larger in size, the buyers are unable to take much benefit of the same too. To extend tax benefit to the buyers the government has also added few sub-sections 80EE, 80EEA under the Income Tax Act but the volume of loan is not allowing buyers to gain desired additional benefits out of these sub-sections. What perhaps needed in the Union <keyword id="10547300" type="General" weightage="20" keywordseo="Budget-2022" source="Orion">Budget 2022</keyword> is to bring dynamic changes in the income-tax slabs and increase the rebates under section 80C, 80EE, 80EEA and 24(b) of the Income Tax Act. One of the greatest philanthropists <keyword id="310500" type="General" weightage="20" keywordseo="andrew-carnegie" source="Orion">Andrew Carnegie</keyword> said - "Ninety percent of all millionaires become so through owning real-estate." Andrew Carnegie is one of the five people who built America, the other four being Cornelius Vanderbilt, John D. Rockefeller, J.P. Morgan, and <keyword id="6629386" type="General" weightage="20" keywordseo="henry-ford" source="Orion">Henry Ford</keyword>. Harv Eker, an author and businessman, known for his theories on wealth and motivation said - "Don't wait to buy 'real-estate', buy real-estate and wait". These two statements said all about owning real-estate and what it could mean to a buyer. Globally, investment in real-estate is directly related to the future of a buyer and also growth of the economy, and so be in India. SEE ALSO: <a target="_blank" class="c-link c-message_attachment__title_link" href="https://www.businessinsider.in/investment/news/budget-2022-could-consider-levying-tds/tcs-on-crypto-trading-make-it-reportable-in-sft/articleshow/88943733.cms">Budget 2022 could consider levying TDS/TCS on crypto trading, make it reportable in SFT</a> <a target="_blank" class="c-link c-message_attachment__title_link" href="https://www.businessinsider.in/careers/news/570-job-openings-at-indian-oil-corporation-for-freshers-who-havent-graduated-yet/articleshow/88948126.cms">There are 570 job openings at Indian Oil Corporation for freshers who haven’t graduated yet</a>

Budget 2022: Expectations for hike in tax deduction on home loans

As of March 2021, <keyword id="3658" type="General" weightage="100" keywordseo="india" source="Orion">India</keyword>’s total lending market size stood at ₹156.9 lakh crore, recording around 100% growth between FY2017 and FY2021. Retail and commercial lending each contribute 49% to total lending in India while microfinance contributes about 2%. Over the recent years, there have been commendable focussed policy initiatives such as <keyword id="6392137" type="General" weightage="50" keywordseo="jan-dhan-yojana" source="Orion">Jan Dhan Yojana</keyword>, <keyword id="3060238" type="General" weightage="80" keywordseo="mudra-yojana" source="Orion">Mudra Yojana</keyword> and <keyword id="13518253" type="General" weightage="50" keywordseo="national-strategy-for-financial-inclusion" source="Orion">National Strategy for Financial Inclusion</keyword> (2019-2024), however, India has a long way to go in terms of financial inclusion. Availability of formal credit to low-income populations is a big challenge and rural areas are underserved. According to the <keyword id="6354424" type="General" weightage="50" keywordseo="world-bank" source="Orion">World Bank</keyword>’s Global Findex Database 2017, only 8% of the Indian population borrowed money through a formal channel like financial institutions. <keyword id="6355185" type="General" weightage="50" keywordseo="rural-india" source="Orion">Rural India</keyword> accounts for about half of GDP, but only about 9% of total credit and 11% of total deposits. While flow of credit at the bottom of the pyramid has improved over the last decade, there is a huge missing middle segment. MFIs (microfinance institutions) have been significant credit providers to micro-enterprises and individuals through JLGs (joint lending groups). MFI segment with average ticket size of less than ₹40,000 has been reasonably serviced by over 200 institutions with outstanding credit of ₹2.5 lakh crore as at March 2021 and growing at 23.8% CAGR (compounded annual growth rate) during FY17-21. Under the Mudra Yojana, the programme aimed at funding the unfunded micro enterprises and small businesses with loans up to ₹10 lakh, ₹15.52 lakh crore were disbursed to 29.55 crore loan accounts during its 6 years of its operations (FY16-FY21), however, average ticket size was still low at ₹52,500 in this period. Micro enterprises with higher credit need of ₹1-5 lakh is a severely underserved segment with only a handful of focussed players. Compared to MFI outstanding credit of ₹2.5 lakh crore, in loans of ₹50,000-10 lakh, which is a much larger market, outstanding credit stands at just ₹1 lakh crore. Micro enterprises faced a huge credit gap of ₹8 lakh crore in 2018 as per IFC. Key issues restricting the flow of credit to this segment include the lack of documents such as income tax returns (ITR), goods and services tax (GST) and adequate banking records. As a result, issues related to income assessment have emerged as major supply-side barriers. Pure Fintech model is not suitable since the above data points are lacking and borrowers need hand-holding in disbursements as well as collections as many upgrade from JLG borrowings. Nonetheless, the emergence of a handful of new age non-banking financial companies (NBFCs) is changing the lending landscape by introducing a model that captures the best of fintech and conventional credit features, transforming the protocols of lending for micro-enterprises and individual business loan requirements. Unlike legacy banks, new age NBFCs are analysing alternative data for income assessment, applying technology more effectively and have an agile and on-ground workforce. For micro-enterprises seeking business loans, lack of collateral is no longer a major constraint and a good credit score or credit history is good enough. Considering their more suitable lending norms for this segment, new-age NBFCs are gaining popularity when it comes to small ticket business loans. Besides, NBFCs approve loans far more quickly than banks and the entire end-to-end process from application to disbursal can be completed within a few days. Players in this space with less than 1% GNPA (gross non-performing asset) even after three COVID-19 waves have proven that backed by a strong underwriting, efficient collection model and leveraging technology, lending to this segment is scalable with a significant impact on growth in income of micro-entrepreneurs. Given the lakh of micro and small enterprises across India that fall outside the purview of formal financial systems, including self-employed individuals who remain ineligible for formal credit, new age NBFCs are playing a pivotal role in promoting the goal of inclusive development. Undoubtedly, such digital lending players can serve millions of unbanked sections across India, influencing their lives positively. The author is cofounder and co-chief executive officer of Moneyboxx, an NBFC. Disclaimer: The opinions expressed are those of the author and do not necessarily reflect the views of Business Insider India.

OPINION: How new age NBFCs are changing the small ticket business loan landscape in India

This World Environment Day the United Nations had only one directive - reject single-use plastic. Hosted by <keyword id="3658" type="COUNTRY" weightage="20" keywordseo="India">India</keyword>, the internet was in an uproar to #BeatPlasticPollution and to reduce humanity’s over-reliance on disposable plastic. It may be the need of the hour, but there’s a sizable economic cost attached to it as well that seems to be getting sidelined in the name of environment preservation. Banning plastic is definitely a boon for the environment. For starters, it reduces the amount of non-biodegradable litter that clogs up storm drains and piles up in landfills. Even the ocean has islands that are made of solid waste that consist mostly of plastic garbage. Indirectly, since disposable plastics are derived from crude oil refining, when their manufacturing reduces, it also reduces the contribution of polypropylene to climate change. But then, there’s flip-side to a ban. Businesses that manufacture disposable plastic, firms using plastics for packaging and even the consumer - all have to bear the cost. The burden of a ban isn’t just limited to the plastics industry. Horizontal and vertical dependants like the petroleum industry, food delivery outlets and even the road-side juice vendor will feel the impact. In India, Sikkim was the first state to implement a ban on plastic bags in 1996. It was also one of the first states to apply a ban on single-use plastics. The state’s been fairly successful in its implementation considering that there’s a very limited space for garbage dumps within their territory. But then again, that’s not always the case. States like Andhra Pradesh and Madhya Pradesh that have significant plastic waste generation have only been marginally successful in implementing partial bans. Taking the most recent case of the <keyword id="6360810" type="UNKNOWN" weightage="20" keywordseo="Plastic-ban">plastic ban</keyword> in <keyword id="13126" type="COMPANY" weightage="20" keywordseo="Maharashtra">Maharashtra</keyword>, the All India Plastics Manufacturers’ Association (AIPLMA) claims that while this initiative may help the environment, it will also result in a <a href="https://economictimes.indiatimes.com/news/politics-and-nation/plastic-ban-india-stares-at-loss-of-rs-15000-crore-3-lakh-jobs/articleshow/64721810.cms">loss of up to ₹15 billion</a> ($220 million) and nearly 300,000 jobs. The snowball effect One assumes that the direct effect of banning plastic use is that plastic wastage decreases, but the reality is broader than that. Plastics is an industry of its own that makes a significant contribution to key sectors in India like textiles and healthcare. That being said, one sector that will be hit the hardest by the plastic ban is the packaging sector. 
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 1. <keyword id="6369865" type="UNKNOWN" weightage="20" keywordseo="job-loss">Job loss</keyword> So, it’s a fairly straightforward correlation that when there’s unemployment in one sector then the supply of labour will increase. In this case, it will affect polymer manufacturers, plastic processors and recycling players. Especially those that work in extrusion, which would include the manufacture of plastic bags and blow moulding which is how bottles and containers are made. It should be noted that the plastics industry is highly labour intensive and largely unorganised. In Maharashtra, specifically, AIPMA <a href="https://www.thehindubusinessline.com/economy/policy/plastic-ban-may-shave-800-cr-off-maharashtras-gst-revenues-says-lobby/article23375711.ece">claims</a> that the ban will result in the shut down of 2,150 industrial units. In India, there’s already a surplus of low wage labourers, which will be further impacted by such a move. The extent of the impact will be determined by the skill set and specialisation that distills into the market. 2. Gross Domestic Product (<keyword id="35050" type="CITY" weightage="20" keywordseo="gdp">GDP</keyword>) will be affected As of 2017, the Indian plastic industry <a href="http://www.plastindia.org/pdf/indian-plastics-industry-report2014.pdf">contributes</a> around 7.1% to the country’s GDP. It’s also complementary to the petrochemical industry that works in tandem. But, the ban itself hits the ‘end user market’ where plastic products are primarily used for domestic purposes. Additionally, the packaging industry is one of the key drivers of demand for plastics. It’s one the fastest growing industries with a compound annual growth rate (CAGR) of 15% over the last five years. It has received major impetus from retail growth, changes in lifestyle, and growth of smaller packaging. The implementation of a strict ban would be a fairly large obstacle for the plastics industry to compensate. In Maharashtra itself, the plastics industry is fairly big. In fact, plastics <a href="https://www.thehindubusinessline.com/economy/policy/plastic-ban-may-shave-800-cr-off-maharashtras-gst-revenues-says-lobby/article23375711.ece">contribute</a> to around 35% of the state’s GDP with a turnover of ₹50,000 crore. It’s also one of the reasons why the state contributes to nearly <a href="http://cpcb.nic.in/displaypdf.php?id=cGxhc3RpY3dhc3RlL0FubnVhbF9SZXBvcnRfMjAxNS0xNl9QV00ucGRm">one-third</a> of India’s plastic waste. Placing a ban on plastic use will retract the demand for plastics overall, thus leading to decreased sales and decreased revenue. As a result, whatever stocks of single-use plastics are left with manufacturers of plastic products, and companies that use them, will basically be a sunk cost after 23 June, as per the <a href="https://www.mid-day.com/articles/maharashtra-extends-deadline-for-disposal-of-existing-plastic-stock-to-3-months/19313179">government directive</a>. AIPMA estimates that the banned products would results in a loss of up to ₹15 billion. 3. <keyword id="142154" type="PERSON" weightage="20" keywordseo="bad-loans">Bad loans</keyword> in the banking sector will increase As the demand for plastics falls, assuming the ban is implemented effectively, a lot of micro, small and medium units (<a href="http://www.freepressjournal.in/mumbai/plastic-ban-chokes-maharashtras-msme-industriy/1246368">MSMEs</a>) in the plastics industry, could default on loans and the proportion of bad loans could increase. This is especially true as one analyses the <a href="http://www.freepressjournal.in/mumbai/plastic-ban-chokes-maharashtras-msme-industriy/1246368">downstream supply chain</a> of plastics. While polymer manufacturing is dominated by large industrial groups, plastic processors and recycling players are largely MSMEs. 4. Fines on small and micro retailers will affect their P&amp;L statements As with any new law or directive, there’s an implementation curve. There will always be a few defaulters who won’t comply immediately, and the heavy fines could send their <a href="http://www.thehindu.com/news/cities/mumbai/retailers-to-move-hc-to-exempt-pp-bags-from-ban/article24213766.ece">profit and loss</a> (P&amp;L) statements for a spin. Large corporations won’t feel the pinch of a ₹5,000, ₹10,000 or ₹25,000 fine, but <a href="https://localpress.co.in/2018/03/plastic-ban-maharashtra-developments-ban-till-date/">roadside vendors, food vendors and delivery kitchens</a> have to be wary. Some vendors have reported that they’ve had to temporarily stall their services as they come up alternative methods of packaging. 5. Cost of going green to consumers More than the plastics sector, industries that depend on plastic for packaging will have to find alternative green methods of presenting their commodities in the market. Nonetheless, there’s <a href="http://ladpw.org/epd/aboutthebag/PDF/SocioEconomicImpactStudy_final.pdf">evidence</a> to support the fact that firms generally pass on this cost onto their consumers where they can purchase a paper/reusable bag at nominal rates. There’s the crux of the issue. More than the repercussions of the plastic ban, what matters is how the ban is embraced by the public. The use of paper bags is only effective if they are reused, otherwise the problem shifts from <keyword id="1820144" type="PERSON" weightage="20" keywordseo="plastic-pollution">plastic pollution</keyword> to deforestation. And, if climate change is the primary concern, banning plastics might not even necessarily be the right solution.

Banning plastics is necessary, but here’s what that might cost India

<div class="KonaFilter image-container float_right"><div class="image">Shutterstock</div></div>If you abandoned the American solar story after the Solyndra debacle, you've missed one of the greatest growth stories in the country.
Since 2011, solar generation has <a href="http://www.eia.gov/electricity/data/browser/#/topic/0?agg=2,0,1&amp;fuel=vtvo&amp;geo=g&amp;sec=g&amp;linechart=ELEC.GEN.SUN-US-99.M~~~~~&amp;columnchart=ELEC.GEN.ALL-US-99.M~ELEC.GEN.COW-US-99.M~ELEC.GEN.NG-US-99.M~ELEC.GEN.NUC-US-99.M~ELEC.GEN.HYC-US-99.M~ELEC.GEN.WND-US-99.M&amp;map=ELEC.GEN.ALL-US-99.M&amp;freq=M&amp;start=200101&amp;end=201310&amp;ctype=linechart&amp;ltype=pin&amp;maptype=0&amp;rse=0&amp;pin=">skyrocketed more than 2,300%</a>. For the first time ever last year, <a href="http://www.businessinsider.com/more-new-solar-than-wind-in-2013-2013-11">the U.S. added more solar capacity than wind</a>.
Goldman Sachs analyst currently see a 40GW medium-term opportunity in the US residential segment alone, <a href="http://www.seia.org/research-resources/solar-industry-data">and we only just breached 180 MW per quarter</a>. This has all been <a href="http://www.businessinsider.com/how-solar-surged-in-america-2013-10">thanks to a combination</a> of falling prices, state subsidies and plain old demand by more environmentally conscious consumers. 
It is true that there have been lots of bankruptcies along the way. At the end of 2012, GTM Research predicted that 180 solar module manufacturers would go under by 2015. This appears to have come to pass: According to Mercom Capital Group, a clean tech consulting firm, global VC investments (which are mostly concentrated in the U.S.) dropped 40% to $600 million in 97 deals in 2013 compared with $992 million in 106 deals in 2012. "Since mid-2012 the new normal for VC funding has been smaller funding quarters and smaller deal sizes," Mercom says. Of the American solar firms <a href="http://en.wikipedia.org/wiki/List_of_renewable_energy_companies_by_stock_exchange">once active on this list</a>, just a handful remain.
This winnowing process has left four main publicly traded American players:
<ul>
<li>San Jose-based SunPower (SPWR) </li>
<li>San Francisco-based SolarCity (SCTY) </li>
<li>Beltsville, Md.-based SunEdison (SUNE) </li>
<li>Tempe, Ariz.-based First Solar (FSLR) </li>
</ul>
The good news is, almost everyone agrees they're poised for another year of incredible growth. But that's not to say it's time to buy the stocks.
It will be a difficult act to top: In the past 12 months, the top three have climbed more than 250%. The "laggard," First Solar, climbed more than 50%. By comparison, the S&amp;P500 gained 25%. Chart:
<div class="KonaFilter image-container"><div class="image">Yahoo</div></div>
<h2>SunPower</h2>
SunPower has the longest track record among the four, having gone public in 2005, and it had a stellar performance in 2013. It also figured among the top-5 fundraisers among U.S. solar firms, according to Mercom. It has led the way in one of the biggest emerging themes in solar: leasing, which allows customers to avoid installation fees and only pay a basic monthly fee. Also, Warren Buffett <a href="http://www.businessinsider.com/warren-buffett-midamerican-solar-project-2013-1">spent $2.5 billion at the beginning of last year</a> to buy the largest solar photovoltaic project in the world from SunPower.
SunPower is now partnering with Digital Federal Credit Union to provide up to $100 million in loans to finance solar installations using SunPower hardware, according to Bank of America Merrill Lynch. IHS says the firm plans to increase its solar cell production capacity by 25%, or 350 megawatts, by 2015.
Goldman is neutral on SunPower shares, Deutsche Bank rates them "hold," and BAML rates them "underperform."
<h2>SolarCity</h2>
Next up is SolarCity, the solar service provider chaired by Elon Musk and run by his cousin Lyndon Rive. The firm just launched the first-ever bonds backed by revenues from solar electricity generation. The $54.4 million facility priced at 4.8%, according to BAML. It now leads market share in the residential sector, and acquired two key companies to beef up customer service and installation.
The company has said publicly that it plans to pursue a second, substantially larger solar bond program in the first half of this year. Goldman estimates they can earner over $350 million for the new round, and get to $700 million by 2016. Goldman also forecasts 50%-60% volume CAGR for the firm through 2016, ahead of 45% market growth. SunPower is rated "buy" by both Goldman and BAML. It is not covered by Deutsche Bank.
SunEdison rounded out the top five U.S. solar fundraisers of 2013, and places in the top-three installers in the country. In 2014, it is likely to be among the first renewable energy companies to form a yield co firm, which are publicly-traded companies formed to own operating assets that produce cash flow. The cash is distributed to investors as dividends. Goldman believes SunEdison will more than double its current installation target to 250 megawatts, which would add to the 200 megawatts it installed in 2014. 
SunEdison is rated "buy" by Goldman and BAML. It is not covered by Deutsche Bank.
 
<h2>First Solar</h2>
First Solar is the only firm on this list with a substantial international presence. It recently opened an operations center in Japan and is expected to partner with local manufacturer TetraSun to distribute there. It also recently bought into a utility-scale project in Mexico. According to Deutsche Bank, it has more than double the cash "of any other player in the industry," and has now "closed the cost gap" with Chinese module manufacturers, which had a slight advantage in the beginning of the year. 
But First Solar shares remain controversial - <a href="http://www.businessinsider.com/david-einhorn-cuts-entire-stake-in-controversial-stocks-yahoo-and-first-solar-2012-5">David Einhorn dropped his stake entirely in 2012</a>, it <a href="http://www.businessinsider.com/most-shorted-stocks-december-2012-2013-1#first-solar-25">once came in No. 1 on our most-shorted-stocks list</a>, and JP Morgan <a href="http://www.businessinsider.com/jp-morgan-said-to-avoid-first-solar-2013-12">named it the No. 1 stock to avoid in 2013.</a> 
Still, as previously mentioned it ended up surging more than 50% - not as much as its peers, but way better than the broader market.
And yet, Goldman has now downgraded First Solar from "hold" to "sell" in its new note. Analyst Brian Lee and his team said First Solar has benefitted from the rush in utility-scale solar projects, but believes the company will get left behind as the rooftop-based market proliferates. That's because the company uses too much "low-efficiency technology" not suitable for smaller projects. Lee also notes First Solar is the only stock he covers that has seen its price-to-earnings ratio expand without any EPS revisions. Deutsche Bank currently rates it "hold." 
While these four firms will get the lion's share of attention since they're public, it's also important to note that there are plenty of private guys out there that are still sailing along. Provo, Utah-based Vivint and San Francisco-based SunRun were among solar's top five fundraisers in 2013, according to Mercom. We've also left out the two major Chinese firms, Yingli and Trina, that survived that country's own massive culling process among solar developers.
But we now have our four protagonists that we'll be watching closely this year.

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