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India Grapples with Credit Issues

While the framework utilised by the rating agencies that has led to a delay in ratings relaying the correct credit information to market participants

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India, Credit, Issues
Recent news whereby credit downgrades have just preceded defaults by Non-Banking Financial Companies (NBFCs) is a case in point. Pixabay

As India grapples with credit issues, one of the primary factors that needs analysis is the broken transmission mechanism that relays credit quality to market participants. In common parlance, the transmission mechanism that provides information regarding the credit quality of the borrower to the lenders is unable to do so efficiently. Recent news whereby credit downgrades have just preceded defaults by Non-Banking Financial Companies (NBFCs) is a case in point.

While the framework utilised by the rating agencies that has led to a delay in ratings relaying the correct credit information to market participants is partially to blame for the inefficacious credit transmission mechanism, issues around rating agencies are only part of the problem. For sure, rating agency regulations must be improved, but we must also realise that “credit market frameworks” are much more than ratings.

We must realise that credit ratings have limitations in terms of predicting credit cycle ups and downs. This phenomenon isn’t limited to just India but is a global feature. The inability of the credit rating mechanism to adequately price in and predict the credit cycle implies that a multi-pronged approach is needed to ensure that the credit quality transmission mechanism works effectively. Essentially, India needs to develop other features of the credit market that will assist market participants in gauging credit quality, thereby reducing the risk of a “jump-to-default” scenario we have witnessed repeatedly over the last 12 months.

Indian policymakers need to start working on a framework that will allow a liquid and deep secondary market to develop in credit products. Credit products here refers to the entire universe of lending, including bonds, loans and other instruments. Market pricing of products and risk and therefore increased participation by investors will help in “price discovery” of the credit quality. Constant pricing of credit risk and the concomitant information and structure that entails will imply that lenders will have a better information set with which to make informed credit decisions.

India, Credit, Issues
As India grapples with credit issues, one of the primary factors that needs analysis is the broken transmission mechanism that relays credit quality to market participants. In common parlance, the transmission mechanism that provides information regarding the credit quality of the borrower. Pixabay

A market that allows for secondary liquidity, albeit even small amounts to start with, will also incentivise borrowers to manage their credit profile better. More importantly, a secondary market for credit instruments will go a long way towards avoiding the bunching of credit as it happens in today’s market. A credit market has a cycle, and without the existence of a robust secondary market, in expansionary credit cycles, poor quality credit gets excessive access to capital. On the contrary, once the credit cycle contracts credit access for all businesses is diminished to a great extent.

We must work towards breaking the above trend that has plagued the Indian economy significantly. A secondary market for credit instruments will incentivise both lenders and borrowers to behave in a way such that the entire available pool of credit goes towards the most optimal usage.

Policymakers also need to start utilising vehicles similar to Real Estate Investment Trusts (REITs) or Infrastructure Investment Trusts (InvITs) to allow for the pooling of credit instruments. While debt mutual funds exist in the market, the aim of the new “credit pooling vehicles” will be to enable institutional investors to access credit instruments across the spectrum, and not just limited to certain corporate bonds. Access to vehicles that allow for greater liquidity and transparency will go a long way in increasing the capital availability and investor participation in Indian credit markets.

As India looks to boost economic growth, it is essential to realise the credit interlinkages in the economy. To boost exports, a primary aim in India, credit access will be a vital component, if not the most important. If credit is constrained by inefficiencies in the credit information transmission mechanism and therefore leads to inefficient lending in the real estate sector, then it is essential to realise that not only is the real estate sector severely affected but so are other areas such as exports. Primarily, an improved credit framework will lead to both higher availability of capital and credit availability at more affordable rates.

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Credit markets, like all businesses, will move in cycles. Indian policymakers must aim to start building on the blocks that will allow credit downturns to be less severe and shorter. The ability to provide the market access to better information and investment structures will go a long way in improving credit pricing, and thereby credit access. (IANS)

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Customers Redeem Coupons 40% More During Diwali, Says GrabOn

Coupons & Deals market leaders GrabOn observed a significant growth in the number of coupons and offers used during the Diwali period since 201

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GrabOn
As Diwali comes with a plethora of sale events from various e-commerce portals, big and small. GrabOn Offers it's Customers Easy and Happy Shopping. Pixabay

Diwali comes with a plethora of sale events from various e-commerce portals, big and small. Needless to say, the average Indian shopper spends big bucks on gifting during this festive season. Hyderabad based online couponing company, GrabOn, has helped online shoppers save on their Diwali expenses by providing the top offers, deals and discounts on products across segments like food, recharge, travel, electronics and more.

Based on their internal data points and insights, they have come up with an infographic illustrating the consumer behavior in terms of coupon redemption and how it has changed over the course of the last 4 years during Diwali i.e. from 2016 to 2019.

GrabOn with a monthly subscriber base of more than 6.5 million users and 3000+ merchant partners onboard, boasts of helping India save over 300 crores in the last financial year alone. Their infographic focuses on the key segments like Travel, Recharge, Food, Electronics, Fashion while covering more. The coupon usage trend also highlights cities with most coupon redemptions. 

This infographic drives further delves into the specifics considering the biggest festival season in India. With a detailed analysis of the consumer demographics, age group, peak usage time, among other crucial insights, this Diwali based infographic puts a limelight on India’s coupon culture.

‘The e-commerce industry and the coupons space share a healthy symbiotic relationship which leads to mutual growth and success. The festive season, Diwali in particular, brings in high transactions. The Bachat Wali Diwali campaign we run during this time is also one of the contributing factors to this increase’, says Ashok Reddy, Founder & CEO, GrabOn.

 

GrabOn
Coupons & Deals market leaders GrabOn observed a significant growth in the number of coupons and offers used during the Diwali period since 2016. Pixabay

Food Tops The List

The Food vertical seems to have enjoyed the most preference during Diwali season, with the maximum number of coupons being redeemed for the category. The percentage usage increased from 21% to 58%. This change can be attributed to cheaper Exclusive offers. Delivery aggregators like UberEats, Zomato, Swiggy, and others are taking the industry by storm.

 Recharge Goes up!

The Recharge segment has seen a steady rise in coupon redemption rate, going up by 9% during Diwali 2018 when compared to Diwali 2017. The data suggests that more people prefer to look for super-saver tariff plans during the festive season.

 Fashion or Electronics Are Not the Most Preferred

While most guesses would go to Fashion or Electronics for having the majority of coupon redemptions, surprisingly both of the categories combined account for 16% of the total coupon usage during Diwali 2018.

 Indian Startups Doing Well

The infographic found Paytm, Ola, Zomato, BookMyShow, and Myntra leading the charge with other category merchants following suit.

GrabOn
GrabOn, has helped online shoppers save on their Diwali expenses by providing the top offers, deals and discounts on products across segments like food, recharge, travel, electronics and more. Pixabay

 About GrabOn

GrabOn is an Indian coupons and deals marketplace, headquartered in Hyderabad, India. It was founded in September 2013 by Ashok Reddy. A pioneer in the affiliate e-commerce coupon industry, GrabOn operates in over 450+ Indian cities. GrabOn provides authentic and latest deals in the industry through the strategic B2B partnerships and a wide network of merchants. Established with a motto of ‘Saving On Everything’, GrabOn offers the latest deals across a wide range of verticals like travel, recharge, fashion, electronics, food, beauty products, clothing, furniture, health, jewelry, movie tickets, automobiles, accessories, and home needs among others.

ALSO READ: Delhi Schools Encourage Students to Celebrate Eco-Friendly Diwali

Media Contact:

Thehasin Nazia: thehasin@grabon.in