Inidia's Tier-II cities attractive for retail loan products: Crisil

Crisil's recent report titled "Retail loan products: Opportunities and risks beyond metros and mini-metros". However, given the differences in growth prospects and asset quality, selecting the right markets will be critical for profitable growth.
Crisil Research expects increasing finance penetration and entry of more players to drive faster growth in retail loans demand in tier II cities.
The report details the current market opportunity, likely growth prospects, emerging competitive scenario and key operating parameters such as finance penetration, average loan size, loan to value ratio and NPAs (Non-performing assets ) in respects of five retail loans products namely Housing loans, loan against property (LAP), Car loans, Two wheeler loans and Gold loans - across 15 tier II markets.

The markets covered are Bhopal, Coimbatore,  Madurai, Indore, Jaipur, Kanpur, Kozhikode, Lucknow, Ludhiana,, Mysore, Nagpur, Nashik, Rajkot, Thiruvananthapuram and Vishakhapatnam. These markets are significant in terms of size and together account for nearly  15% of the demand for retail loans in India.

Crisil believes that growth prospects in many of these markets are extremely strong. Car loan disbursements in 10 of the 15 markets assessed are expected to grow at about 20% CAGR (Compounded Annual Growth Rate ) over the next 2  years as compared to 13% in the larger cities.

In seven of these cities, loan against property that is property mortgage loan disbursements would grow faster than the rest of India.

Gold loans are expected to grow at a much faster pace (over 50 % annually) in 5 non-southern cities assessed.
Mr. Prasad Koparkar, Head (Industry & Customised Research) Crisil Research said, "Stronger growth prospects, lesser competition, higher yields and profitability comparable to the larger cities make tier II markets an extremely attractive proposition for financiers."
Mr. Ajay Srinivasan, Head, Industry Research, Crisil Research Said, "Contrary to popular perception, not all tier II markets fare poorly in respect of asset quality. In 8 out of 15 cities studied, the level of NPAs compares favourably with the all-India average for all the five retail loan products,"
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