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Nashik, the sixth-largest credit market in the state, is seeing a rebound in credit demand for most products as revealed by a study.
Banks have struggled to grow their balance sheets over the past two pandemic-ridden years and analysts expect credit growth to recover slowly.
However, a district tucked away in western India is showing glimmers of hope. Nashik, the sixth-largest credit market in Maharashtra, is seeing a rebound in credit demand for most products, as revealed by analysts at ICICI Securities.
For one, vehicle sales have grown 40% year-on-year fuelling lending with used vehicles emerging as a key driver. “The key emerging trend is increased used-car financing volumes – as high as 2x of pre-Covid level and monthly disbursement being 20-30% higher than pre-Covid level,” the analysts said in a report.
Better performance by the farm sector has meant that the demand for tractors and other commercial vehicles has also improved, again boosting credit. Private sector banks have been large players in this segment although non-bank lenders dominate this space.
Microfinance remains a laggard and the pain points revealed by the pandemic are yet to heal. Disbursements remain muted as lenders still prefer existing customers. The overall assets under management are Rs 800 crore for the district and the only silver lining is improvement in asset quality as collections get back to pre-Covid levels, the analysts said.
In the safest loan segment, home loans, the district has seen sharp growth. The affordable space has grown 15% in financial year 2021-22. Nashik’s share is 1.2-1.4% of the total disbursed throughout the country, the analysts added. But a bulk of the home loans have been made to self-employed individuals who are riskier than salaried individuals and require close monitoring.
Most loan segments in the district that boasts a strong belt of small businesses have shown improvement in growth and asset quality.