Indian shadow banks remain weak as credit crisis continues unabated

Authorities have taken more steps recently to help the shadow bank sector, which plays a vital role in getting money to everyone from small merchants to property tycoons

The health of India’s shadow banks remained weak last month as a credit crisis continued to sting. Among four indicators compiled by Bloomberg News covering areas including liquidity and share performance, three were stuck in the same position as the previous month, with two at levels indicating weakness.

Another gauge showed total outstanding debt increased at 50 financial firms and other companies impacted by the crisis, as banking-system liquidity remained buoyant given the central bank’s monetary easing.

To be sure, the absolute amount of outstanding debt wasn’t at alarming levels, and access to credit markets for healthier financiers could help get money flowing more efficiently again — just what the flagging economy needs. But if more troubled borrowers continue to add rather than pare borrowings, that could prolong the crisis.

Authorities have taken more steps recently to help the shadow bank sector, which plays a vital role in getting money to everyone from small merchants to property tycoons. Some observers see an extended battle, as the nation’s slowing economy complicates those efforts.

Moody’s Investors Service recently warned that a prolonged credit squeeze among India’s financiers may worsen, just as S&P Global Ratings said risks of contagion are rising in the financial sector. The premium that investors demand to hold shadow lender bonds over sovereign notes is persistently high and a custom gauge of shares of 20 financial firms and other companies impacted by the crisis remained sluggish…

Read More: Banking Crisis

Here’s how you can avail of a loan despite having a poor credit score

The following tips and suggestions will help you avail loan to deal with financial exigencies or unavoidable life-events, despite your poor credit score.

BUSINESS STANDARD – Banks and NBFCs use credit scores to evaluate the creditworthiness of loan and credit card applicant. Credit score of 750 and above are considered as good and hence, those not making the cut have very low chances of loan or credit card approval or pay higher rates for them. While there are time-tested methods of improving your credit score, those take time and patience. The following tips and suggestions will help you avail loan to deal with financial exigencies or unavoidable life-events, despite your poor credit score:

Opt for secured loan:

Secured loans are those in which the loan applicant has to pledge asset(s) as security or collateral against the loan amount. Loan against property, loans against fixed deposits, loan against securities, gold loan are some of the most popular variants of secured loans. As the lenders have the option to sell your collateral in the event of a loan default, they may ignore or relax the requirement of a good credit score while evaluating your creditworthiness.|BS

For borrowers with similar credit profiles, secured loans usually have a lower interest rate than the unsecured loans. Given that those with lower credit score might have to pay a higher interest rate on an unsecured loan, opting for a secured loan might help in reducing your interest cost.

Approach NBFCs and housing finance companies (HFCs):

NBFCs and HFCs usually have less stringent loan evaluation processes than banks. NBFCs and HFCs usually target borrowers avoided by banks. Hence, those with lower credit score may have higher chances of loan approval from NBFCs than banks…Read More