Please Share:: 
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Apart from sore backs, the major takeaway from our 800 km road trip across
South India was the sense of a significant loan opportunity in semi-urban
India, with relatively safe credit practices. We believe Private banks’
recently deepened distribution puts them in a sweet spot, scoring on
service levels over PSUs and on stronger risk practices over NBFCs.
Improving credit penetration. Greater affluence is creating a new
bankable customer segment. This is not the traditional low-ticket/high-risk
borrower, given the ability and willingness to offer tangible security. Private
banks have a distinct advantage – they score above PSUs on service and
above vertically-structured NBFCs with product diversity.
The way to go is high-touch. Weak data impedes the efficacy of the
templated, credit-scoring urban consumer credit model. NBFCs have built
their success on this proposition, and the banks are making the necessary
adjustments to make their business more high-touch in these areas.
Expanding ticket sizes support the economics.
NBFCs – up the risk curve. We detect a bit of aggression in NBFCs. High
LTVs and poor customer data indicate an unstable equilibrium – an NPL
shock could feed on itself and become bigger. We also see risk from tighter
regulations (like 90-day NPL recognition).
State banks facing challenges. The improved distribution of the larger
private banks weakens a key competitive advantage for the PSUs. They still
struggle to meet service standards, and lack of employee stability (constant
transfers) makes the high-touch model not viable.
Technology is a key driver to financial inclusion, with lower costs enabling
the opening of $2 accounts. This process will, however, still need a
regulatory push, as balances are still too low to incentivize banks from a
purely commercial angle.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Apart from sore backs, the major takeaway from our 800 km road trip across
South India was the sense of a significant loan opportunity in semi-urban
India, with relatively safe credit practices. We believe Private banks’
recently deepened distribution puts them in a sweet spot, scoring on
service levels over PSUs and on stronger risk practices over NBFCs.
Improving credit penetration. Greater affluence is creating a new
bankable customer segment. This is not the traditional low-ticket/high-risk
borrower, given the ability and willingness to offer tangible security. Private
banks have a distinct advantage – they score above PSUs on service and
above vertically-structured NBFCs with product diversity.
The way to go is high-touch. Weak data impedes the efficacy of the
templated, credit-scoring urban consumer credit model. NBFCs have built
their success on this proposition, and the banks are making the necessary
adjustments to make their business more high-touch in these areas.
Expanding ticket sizes support the economics.
NBFCs – up the risk curve. We detect a bit of aggression in NBFCs. High
LTVs and poor customer data indicate an unstable equilibrium – an NPL
shock could feed on itself and become bigger. We also see risk from tighter
regulations (like 90-day NPL recognition).
State banks facing challenges. The improved distribution of the larger
private banks weakens a key competitive advantage for the PSUs. They still
struggle to meet service standards, and lack of employee stability (constant
transfers) makes the high-touch model not viable.
Technology is a key driver to financial inclusion, with lower costs enabling
the opening of $2 accounts. This process will, however, still need a
regulatory push, as balances are still too low to incentivize banks from a
purely commercial angle.
No comments:
Post a Comment