According to a CRISIL report on the home loan portfolio, lending to self-employed individuals has increased to 30 percent for Fiscal Year 2017-18, against the 20 percent recorded since last 4 years. However, the concerning aspect is that there is a rise in loan defaults as well. The report says that in the previous 4 years, home loans to self-employed individuals are increasing at a compounded growth rate of 33 percent. Also, by the end of fiscal 2018, the outstanding balance of home loans for this segment is projected to cross the mark of Rs. 2 lakh crore.
Few years ago, the gross NPAs (Non-performing Assets) in the self-employed segment was about 0.7 percent, which is expected to rise by 40 basis points. That would mean a 1.1 percent increase by the end of fiscal 2018.
The report also revealed that the increase in home loans was due to new Housing Finance Companies (HFCs) developing rapidly in the segment. Since banks have been focusing on the retail sector owing to weak market demand from businesses and corporates, large HFCs have started flexing their muscle in the self-employed segment.
Since HFCs face higher risk while dealing with self-employed individuals as compared to the salaried segment, they’re inclined to increasing yields to cope with the high credit costs. In addition, they are also using practices such as higher in-house sourcing, and building new techniques to inspect income data without proof, in an attempt to overcome the issues of borrower data.