Tag: credit

RBI Governor meets MD, CEOs of small finance banks, BFSI News, ET BFSI

Banking & Finance

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The Reserve Bank of India on Friday held a meeting with heads of small finance banks on credit flows to different segments of the borrowers and get a sense of emerging stress on banks’ balance sheet in view of the current economic situation.

The video conference meeting, chaired by RBI Governor Shaktikanta Das, was also attended by Deputy Governors M. K. Jain, M.D. Patra, M. Rajeswar Rao and a few other senior RBI officials.

In his opening remarks, the Governor recognised the important role of the SFBs in delivering credit and other financial services to individuals and small businesses. He also emphasised the supervisory expectations in terms of maintaining their business resilience and managing risks prudently.

Das advised the banks to pay focussed attention on improving customer grievance redress process while also strengthening IT systems in the interest of the banks and their customers.

A lot of discussions hovered around assessing liquidity scenario for banks and making an assessment of bad assets emerging from current economic situation.

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Credit costs to remain elevated for NBFCs: CARE Ratings

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Credit rating agency CARE Ratings expects credit costs to remain elevated for non-banking finance companies (NBFCs) in FY22 amid the second wave of Covid-19 pandemic.

For FY22, CARE Ratings expects a level of stress, especially in the loan portfolio under restructuring and those which were under moratorium, the impact is likely to be visible in the next one year.

“As such, delinquencies are estimated to rise moderately,” according to a report by the credit rating agency.

The agency observed that NBFCs have been grappling with a succession of uncertain events since 2016 — demonetisation, Goods and Service Tax (GST) implementation, liquidity crisis in 2018 and Covid-19 pandemic in 2020.

These uncertain events derailed growth, disrupted collections and increased loan loss provisioning across asset classes.

Financial metrics

“From Q4 (January-March) FY20, credit costs across major NBFC sub-segments reported substantial increase and has remained at elevated levels. This affected the financial metrics for H1 (April-September) FY21 negatively,” the report said.

Also read: FIDC seeks relief measures in wake of second Covid wave

The agency assessed that after September 2020, the economy re-opened with signs of revival which led to improvement in the sector, collections inched closer to pre-Covid levels and growth gathered momentum. But the second wave of Covid-19 has pulled back the recovery gains with subsequent impact on asset quality.

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Bank credit sees uptick, but will it hold amid Covid resurgence ?

Banking & Finance

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Bank credit has seen an uptick in recent months indicating a recovery in economic activities but the resurgence of Covid-19 cases and limited lockdowns are raising fresh concerns.

Reserve Bank of India data reveal that year-on-year growth in non-food bank credit was 6.5 per cent in February. This is not bad when compared to a growth of 7.3 per cent in February 2020.

But the ongoing lockdowns are set to impact credit growth. CARE Ratings has pegged the potential loss of GVA to the country from the lockdown in Maharashtra for a month at about ₹40,000 crore in real terms.

Amongst sectors, credit growth to agriculture and allied activities, service and personal loans recorded robust expansion. However, credit to industry contracted marginally by 0.2 per cent in February compared to 0.7 per cent growth in February 2020 “mainly due to contraction in credit to large industries by 1.5 per cent”, RBI data showed.

Bankers expect a revival in credit demand to large industries in the second half of the fiscal with the capex push from the Union Budget.

Between end of March 2020 and February 2021, gross bank credit grew 3.3 per cent against 3.5 per cent last year, which analysts say is quite robust given the lockdown in the first quarter of 2020-21.

Provisional data by banks for the fourth quarter on loans and advances has shown an improvement compared to earlier quarters since the pandemic.

HDFC Bank reported a 13.9 per cent growth in advances as on March 31, compared to a year ago while Federal Bank’s gross advances increased by nine per cent in the same period. Advances growth for IndusInd Bank and YES Bank was more modest.

 

RBI policy

With the Monetary Policy Committee of the Reserve Bank of India expected to continue with its accommodative stance and maintain status quo on rates, there could possibly be continued demand for credit.

More clarity on economic prospects will be available on April 7 when the RBI comes out with the Monetary Policy statement.

According to rating agency Crisil, bank credit growth is set to speed up to 9-10 per cent in the new fiscal after mid-single digit growth in fiscal 2021 but it has cautioned that the sharp rise in Covid-19 cases since mid-February and the impact of any stringent containment measures on businesses are the key threats to the nascent demand recovery and could impact the credit quality outlook adversely.

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HDFC Bank’s Rahul Shukla confident about bank’s portfolio

Banking & Finance

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The country’s largest private sector lender, HDFC Bank, is optimistic about credit demand from India Inc in the new fiscal and said there is already capex-led credit demand in mid-sized corporates and small and medium enterprises.

“The economy will show a synchronous recovery with a pick-up in domestic demand in consumption and investment and external demand in the following 12 months. There are strong expectations of private sector capex revival in the second half,” said Rahul Shukla, Group Head, Wholesale Banking, HDFC Bank.

In an interaction with BusinessLine, he said that even today, there is private sector capex leading to credit demand in sectors such as food processing, textiles, industrial chemicals, iron and steel in some parts of country, packaging, auto components and electrical appliances.

HDFC Bank registers double-digit growth in deposits and advances in Q3

Noting that the capital expenditure is front loaded by the government, Shukla said the infrastructure cycle is robust for banks to participate.

Upward trend

“Today, you can’t think of a central public sector enterprise that has not increased its capex plans significantly. This push is showing its impact on the economy,” he said.

Shukla also noted that various macro indicators, including PMI data, goods and services tax collections, e-way bills and passenger vehicle sales, are showing an upward trend.

HDFC Bank, CSC partner to launch EMI collection service for business correspondents

“Due to a normal revival of nominal GDP growth in 2021-22, along with a strong push to infrastructure and industrial growth (through PLI and rising commodity prices), loan growth could rise,” he said, adding that a revival of growth through capex, strong balance sheets of the largest banks, creation of a bad bank and low interest-rate environment could lead to a secular revival of loan growth.

Data released by the Reserve Bank of India revealed that bank credit rose by 6.63 per cent to ₹107.75 lakh crore in the fortnight ended February 26, 2021.

Balanced advances

Meanwhile, when asked about HDFC Bank’s wholesale strategy going forward, Shukla said the lender has largely maintained balanced advances of 50:50 retail and wholesale.

“That is our model. It is balanced. There are times when retail is slow and wholesale picks up and there are times when wholesale will be slow and retail picks up,” he said.

Shukla also expressed confidence about the bank’s portfolio and said it will continue to perform well during the current phase.

“It has been tested through the pandemic and has given us greater confidence in our approach to doing business,” he stressed.

As on December 31, 2020, HDFC Bank had reported a 5.2 per cent growth in domestic retail loans and 25.5 per cent increase in domestic wholesale loans. The domestic loan mix as per Basel 2 classification between retail:wholesale was 48:52.

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Ten reasons why banks are reluctant to lend to big corporate houses, BFSI News, ET BFSI

Banking & Finance

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A few years back, big corporates were the cynosure of the banking sector and were given red carpet treatment while the small borrowers had to fret it out.

However, the ballooning of bad loans by big corporates and the opening up of other lending avenues have turned tables on India Inc.

Credit to industry contracted by 1.3 per cent in January 2021 as compared to 2.5 per cent growth in January 2020 mainly due to contraction in credit to large industries by 2.5 per cent (2.8 per cent growth in January 2020). The outstanding bank credit to large industries declined by Rs 59,610 crore on a year-on-year basis to Rs 22.78 lakh crore as on January 29, 2021, according to the latest RBI data.

So what makes banks shun large corporates?

1. The binding constraint for lending has not been liquidity or interest rates, but risk aversion by bankers, who have been burnt in episodes like DHFL, HDIL, where thousands of crores went kaput.

2. Indian banks are already saddled with one of the world’s worst bad-loan ratios, and are naturally reluctant to add to those risks.

3. Economic activity is still in the doldrums, though it is showing signs of improvement of late, which makes risk assessment difficult.

4. Fresh slippages in the December quarter have risen sequentially, with the top ten lenders by the size of their loan book, adding close to Rs 80,000 crore in slippages during the December quarter.

5. Banks have other avenues to lend. Disbursements under the emergency credit line guarantee scheme was at Rs 1.6 lakh crore, and banks deployed around at Rs 1.4 lakh crore through the targeted long-term repo operation and partial credit guarantee scheme, which served as credit substitutes. These credit is guaranteed by the government and less risky.

6. Fear of prosecution of bank officials if the credit decision goes wrong has also kept banks away from lending huge amounts to corporates.

7. Long gestation periods, the uncertainty of returns and cost overruns that saw fortunes of many top corporate houses dwindle is also keeping banks away.

8. Having burnt their fingers by lending astronomical amounts to large business groups, lenders such as YES Bank intend to stay away from large corporate businesses and rebuild loan book in the mid- and small-corporate segment.

9. Also, there are not enough opportunities as the corporate sector, which account for 49% of the overall bank credit, has put their capital expenditure plans on the back burner.

10. Success of the likes of HDFC Bank in building retail loans has drawn other banks to it. Retail loans are typically secured and risk is evenly spread.



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Bank loan growth likely to double next fiscal, BFSI News, ET BFSI

Banking & Finance

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Bank loans are growing at a slower pace while deposits are clipping ahead fast.

The non-food bank credit grew at 5.7% in January 2021 as against an increase of 8.5 per cent in the same month last year, according to RBI data.

As on February 12, outstanding bank loans stood at over Rs 107 lakh crore, which was up 6.6% on year. However, on a fortnightly basis, outstanding loans fell by Rs 1,040 crore between January 29 and February 12.

The contraction

Loans to industry contracted by 1.3% in the reporting month as compared to 2.5%growth in the same period last year, mainly due to contraction in credit to large industries, the data showed.

Credit growth to the services sector decelerated year-on-year moderately to 8.4% in January 2021 from 8.9%.

However, credit to transport operators and trade continued to perform well during the month, registering accelerated growth.

Personal loans growth decelerated by 9.1% in January 2021 compared to 16.9% a year ago, the data showed.

Deposits

However, deposits are going strong as people tend to save money during uncertain times.

As on February 12, bank deposits stood at nearly Rs 148 lakh crore, up 11.8% on year, while investment by banks was 17.9% higher at close to Rs 45 lakh crore.

Due to lower credit demand, banks were forced to park their surplus deposits in investments such as government bonds and corporate debt papers.

Why the drop?

Experts say credit growth has been supported for the last few months by retail loans, especially home loans, along with disbursements to micro, small and medium enterprises under the government’s Emergency Credit Line Guarantee Scheme.

However, companies have restricted their borrowing from banks and some are tapping the bond market for their credit requirements.

Also, the availability of low-cost funds under the RBI’s targeted long-term operations has hit credit growth.

According to CRISIL Ratings, corporate credit growth is likely to contract this financial year as the companies have put capital expenditure on the back burner.

The silver lining

Bank credit is expected to grow at a higher pace during the next fiscal by at least 9% to 10%. This is in contrast to the bank credit growth which was seen rising at around 4% to 5%, despite the Covid-induced contraction.



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Small Finance Banks gear up for expansion, higher disbursements

Banking & Finance

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With collection efficiencies slowly moving back to normalcy, small finance banks hope to be in expansion mode in the coming months even though a segment of customers remain impacted by the Covid-19 pandemic.

Along with higher disbursements, branch expansion and the listing exercise for some of them are likely to gather pace in the coming months.

Small finance banks came into existence after 2016 and were set up with the aim of furthering financial inclusion to the unbanked and under-served areas and customers. There are 10 entities that had started SFB operations, of which three are listed.

The total size of balance sheet was ₹1.33 lakh crore, noted a recent report by CARE Ratings based on RBI’s recent Report on Trend and Progress of Banking in India. “Their share in the overall banking system was very insignificant at 0.7 per cent,” it noted.

‘Reset’ opportunities

SFBs say that while collection efficiencies are now normalising, some customer segments and geographies are still lagging behind.

A large chunk of their customer base is from the unorganised sector or are urban workers and amongst the worst hit by Covid-19 and the lockdown, in the form of job losses and salary cuts. For segments like mall and restaurant staff, cab and auto drivers, commercial vehicle owners and housemaids, their salary and jobs are yet to get back to normal, which has meant that their loan repayments too are yet to go back on track.

States like Maharashtra, West Bengal, Assam and Punjab too are lagging in collections in micro banking due to a variety of reasons.

Collection efficiencies have been showing month-on-month improvement, ranging from 80 per cent to 95 per cent for most banks. For the quarter ended December 31, 2020, the three listed SFBs — AU Small Finance Bank, Equitas Small Finance Bank and Ujjivan Small Finance Bank — saw improving collection efficiency across most segments and geographies.

“Collections in non-delinquent accounts are also moving close to pre-Covid levels; as of January 2021, around 95 per cent of customers are paying EMIs as against 91 per cent as of October 2020,” said Nitin Chugh, Managing Director and CEO, Ujjivan SFB.

Equitas SFB reported collection efficiency of 105.36 per cent in December 2020 and billing efficiency of 88.73 per cent. It also said that collections are reaching the pre-Covid level.

AU SFB too reported in its third quarter results that collection efficiencies and activation rates have achieved normalcy across most segments.

Among the unlisted banks, ESAF SFB reported collection efficiency of 94 per cent in January.

“Collection efficiency has not come back fully but with the economy having substantially opened up, reverse migration has also happened,” noted the head of an SFB, adding there are now opportunities to grow and “reset” finances and processes.

 

Renewed credit demand

Banks have reported renewed credit demand across most segments from borrowers, including micro finance, affordable housing, small business loans and personal loans. Provisioning has also been done upfront to ensure that the focus can now be on growth.

Both Equitas SFB and AU SFB have reported net profits for the third quarter of the fiscal and though it reported a net loss, Ujjivan SFB has made significant provisions in the quarter.

Gross non-performing assets ratio has also been contained for all three listed SFBs at less than 2.5 per cent at the end of the third quarter.

Till now, advances have seen muted growth. AU SFB reported 14 per cent increase in advances growth on annual basis, 11 per cent growth on quarter-on-quarter basis in December 2021 quarter. For Ujjivan SFB, disbursements for the third quarter of 2020-21 fell to ₹2,184 crore vs ₹3,403 crore a year ago.

To address issues faced by them, small finance banks plan to set up separate industry body

PN Vasudevan, MD and CEO, Equitas SFB, said the lender disbursed around ₹2,500 crore in the third quarter, which is about 80 per cent of pre-Covid levels, and expects it to grow in the fourth quarter. “As of December, our advances grew by 19 per cent year-on-year and now about 79 per cent of our advances is secured,” he said in an investor call post the third-quarter results.

“Disbursements are more or less back to pre-Covid levels and even exceeded it in January, when we disbursed ₹650 crore of micro loans. Most of the micro businesses are getting back to normal, except a few sectors, even though challenges are there. Over a period, recovery is very promising and demand is also coming,” said K Paul Thomas, MD and CEO, ESAF SFB.

CARE Ratings noted that an advantage that most SFBs enjoy is that they have been paying higher interest rates on deposits to garner funds which, in turn, gets translated on the lending side too. “This can be seen in the returns on advances, which is around 20 per cent and is higher than the other banks’ by 8-11 per cent,” it said.

Small Finance Banks have greater presence in well-banked States, says RBI report

Branch expansion

Branch expansion is also likely to be high on the agenda for most of these lenders. The RBI’s latest monthly bulletin had noted that SFBs have greater concentration of branch network in relatively well-banked States.

While there has been a rapid growth in the branch network of SFBs since their inception, this growth has been markedly concentrated in the Southern, Western and Northern regions, which are known as the relatively well-banked regions in the country, RBI officials Richa Saraf and Pallavi Chavan said in an article in the bulletin.

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A ‘Shakthi’ dose from the RBI

Banking & Finance

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Finance Ministers generally look for endorsement of their Budget exertions from two entities — the stock market and the central bank. The first comes right away, practically simultaneously, alongside the Budget. The second, from the central bank, comes in its monetary policy announcement immediately following the Budget.

Various stakeholders draw their cues from the signals that come from these two informed assessments. While market reactions are easily gauged by index and individual stock movements, the central bank’s statement and the Governor’s comments are carefully parsed. They are read to detect if the central bank is fully on board with the government plans or whether there are any reservations. Of course, even when there are misgivings, they are always couched in mild and respectful language.

The Finance Minister’s Budget has got the unequivocal thumbs up from both this time. The market was up by a whopping 5 per cent in a single day — impressed apparently by the focus on growth, infrastructure spending, privatisation plans and the attempt at transparency on the fiscal deficit numbers.

Today, the RBI monetary policy committee has provided its own support. It has left the key repo rate unchanged at 4 per cent. The RBI has already cut this rate by 250 basis points over the past two years, with about 115 bps of this coming in the past year in response to the pandemic. The policy guidance is in line with its stance of remaining ‘accommodative’ as long as necessary. Inflation numbers as evidenced by the movement in consumer price index (CPI) are relatively mild and within the comfort zone for the central bank. The projected CPI for the first half of the next year also reflects an easing to a range of 5 per cent and moving further down to 4.3 per cent in the third quarter.

Facilitating massive borrowing

The key question in this policy was what the RBI would say about the government borrowing programme. The government is set to borrow about ₹12 lakh crore or about ₹25,000 crore every week in the next year. The RBI has provided an assurance that it will manage it in a non disruptive manner. This was par for the course.

And then the RBI pulled out a rabbit from its hat by announcing direct retail participation in government bonds buying through the RBI. This is no doubt a very important step — and at least in theory, helps diversify the lender base for the government. In the long run, this may help provide more stable interest rates for both the government and the entire economy. This is also a good option for high networth individuals who may be uneasy with the vertiginous climb of the stock market indices currently.

However, it bears remembering (even as one receives the news with optimism) that past experience with regard to fostering retail participation through various other agencies have been lukewarm. Also, these measures, welcome as they are, will take time to fructify. It may be a bit too much to expect that retail investors are going to queue up and jostle outside RBI doors to buy government bonds this year (like they did to return old currency notes four years ago !)

The economy is set to begin recovering from the troughs of the past two years. As the Governor put it succinctly in his concluding remarks, the only way for the economy to go now is — up. How the RBI handles the massive borrowing programme as well as rising corporate demand for credit — without letting interest rates get out of hand — is going to be it’s biggest challenge in the year ahead. The bond markets remain sceptical if the initial movements are any indication.

(The writer is a Mumbai-based freelance journalist)

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RBI’s norms will enhance stability of NBFC sector: Fitch Ratings

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The proposed changes to India’s regulatory framework for non-bank financial institutions (NBFIs) recently unveiled in the Reserve Bank of India’s (RBI) discussion paper are likely to enhance the sector’s stability, according to Fitch Ratings.

The credit rating agency believes that the reforms would preserve NBFIs’ niche business models, and could improve the funding environment for some entities by strengthening investor confidence in the sector.

”For the sector as a whole, the proposed measures should strengthen governance and risk management, although we do not view these areas as major credit weaknesses for Fitch-rated Indian NBFIs. The longer-term impact of such reform would also depend on its implementation, and robust regulatory and market scrutiny will be key in holding entities to higher standards,” the agency said in a note.

Scale-based regulations

ICRA observed that larger entities face enhanced disclosure requirements, and tighter risk and capital management requirements, which would likely be credit positive, it added.

It opined that the scale-based regulations reflect calls for closer supervision of large NBFIs that have grown more systemically significant.

“We believe the moves to strengthen risk controls and frameworks should be manageable for Fitch-rated NBFIs. For example, they should already comfortably meet the suggested requirement for “Upper Layer” NBFIs, expected to include 25-30 of the largest entities including Fitch-rated names, to maintain a minimum common equity Tier 1 ratio of 9 per cent,” the agency said.

Fitch views proposals to appoint auditors by rotation, as well as requirements to disclose information such as the incidence of covenant breaches and asset quality divergence as credit positive.

Unlike banks, many NBFIs have appointed the same auditors for many years. In addition, lending to directors and senior employees would be restricted, reducing governance risks.

Core banking solution

Requirements to implement a core banking solution (credited for improving efficiency and reducing operational risks in banks) and introduce an internal capital adequacy assessment process (ICAAP) could further strengthen the framework for monitoring and managing risks.

Most large NBFIs’ systems are already integrated with banks and payment portals, and Fitch believes additional costs to meet the core banking solution requirement would be manageable. However, the measure could pose a more significant expense for mid-sized NBFIs.

For NBFIs in the Upper Layer, listing may be made mandatory. The agency opined that this would affect only a few corporate-backed NBFIs, and should not present a challenge given their parents’ experience in capital markets.

 

Real estate lending

In general, business models should not be significantly affected, but some lending activities could be curtailed by the suggested changes, especially in real estate, ICRA said.

The agency observed that the RBI is looking to restrain lending to early-stage development projects that have not yet received regulatory approval, and has proposed added internal controls for lending against land acquisition.

“Some entities have built up exposures to these risky areas in recent years, which have become a point of vulnerability for the sector. The suggested new rules could curb a further run-up in such exposures in the longer term,” the agency said.

Provisioning

Fitch is of the view that the suggested reform would also raise NBFIs’ standard provisioning requirements on commercial real estate lending, to be in line with those for banks.

Fitch-rated Indian NBFIs do not engage in real estate lending, other than IIFL Finance. However, if IIFL is placed in the Upper Layer, any added provisioning from this proposal is unlikely to be significant relative to the firm’s broader provisioning needs in light of the pandemic, the agency said.

Fitch noted that NBFIs with assets below ₹1,000 crore (around $130 million) would continue to operate under current frameworks, but additional rules aligning non-performing loan recognition and a new leverage cap of seven times would add to regulatory robustness.

The central bank further highlighted the need for a resolution framework for failing NBFIs. This would be another important element in the regulator’s financial stability toolkit.

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Why having no credit history is a disadvantage

Personal Finance

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With the Reserve Bank of India (RBI) slashing the policy rate to just 4 per cent in 2020, banks have lowered the interest rates charged on various retail loans — personal, vehicle and home loans — in the last few months.

Yet, many of you, especially the first-time borrowers, may not get the best rate in the market. A common reason for this is your low credit score.

A credit score represents the creditworthiness of an individual, typically assessed by external agencies or credit bureaus. In India, the RBI has licensed four such credit information companies — CIBIL, Experian, Equifax and CRIF High Mark.

The CIBIL score — the most widely used one — for instance, ranges between 300 and 900, in increasing order of one’s creditworthiness.

Borrowers with a CIBIL score of 750 and above are usually offered the most competitive rates by banks. For individuals, whose score is lower than 750, banks charge higher spreads, after considering other factors such as the size and the type of the loan. For instance, SBI charges an interest rate of 3 per cent over the two-year MCLR from a borrower with CIBIL score of 757 and above for loans availed under SBI Car Loan Lite Scheme (a fixed-rate auto loan). Under the same scheme, borrowers with scores ranging between 689 and 756 will be charged a rate of 4 per cent over the two-year MCLR. Some banks might outrightly reject a loan applications because of the poor credit score of the borrower.

While it is a no brainer that borrowers with irregularities in repayment of EMIs or credit card bills would suffer from a lower credit score, the first-time borrowers are not better off either.

No credit history

A borrower who has not availed of any credit in the past would get a credit score of less than 750 only. In some cases, the score may also be reported as ‘NA’ or ‘NH’, indicating that the borrower does not have sufficient credit history and is viewed negatively by lenders.

This is because having a credit history enables a lender to assess your repayment capabilities by determining whether you have managed your credit responsibly in the past. Besides, your credit history helps lenders to assess your ability to service any additional debt that you may require.

In the absence of any such reference to check the payment track record, the lender will have to rely on other factors such as income and demographics to evaluate the creditworthiness. Hence, CIBIL gives such borrowers a low score, implying the need for further due diligence by the lender.

The CIBIL score tracks payment records of the past 24-36 months. Ideally, one should have a minimum credit history of at least six months as on the date of generation of your credit report for a better score.

Frequent loan enquiries

Even if you haven’t taken any loan till now, if you have reached out to multiple bankers to check the best deal available for you, it may work against you. CIBIL captures information on the loan enquiries made by you in the last seven years. Each of your loan application would have in turn triggered a hard credit enquiry by the lender. Multiple hard enquiries in a short span of time reflects a behaviour of seeking excessive credit. Rejected loan applications also impact your credit score.

However, one must remember that when you check your score for your own understanding, it is just considered as a ‘soft inquiry’ and has no impact on your credit score. You can check your CIBIL score by providing details of your PAN card and email ID, on CIBIL’s website.

Mind your limits

If you have now decided to take a credit card, in a bid to improve your credit score, be mindful of your credit spends. Any increase in the outsanding balance of your credit card, or an increase in the number of cards, is viewed as an increase in repayment burden and may negatively impact your credit score.

Besides, your detailed CIBIL credit report also reflects the highest amount ever billed (including interest and fees) for a particular credit card or overdraft facility.

That apart, while evaluating your current loan mix, CIBIL views unsecured debt obligations negatively (juxtaposed to secured debt such as home loans etc. that help build long-term appreciating assets).

To keep your credit score in check, avoid taking up multiple credit cards, and try to limit your credit utilisation within the 30 per cent of your credit limit, unless required.

(This is a free article from the BusinessLine premium Portfolio segment. For more such content, please subscribe to The Hindu BusinessLine online..)

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