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Lower Rates, More Tech

Complete digitisation of loan disbursal and repayment processes to become reality soon

Illustration by Raj Verma Illustration by Raj Verma

Good times are back for borrowers, especially those taking new loans and already servicing floating rate loans. The reason: the repo rate is at its lowest level since 2000. Will this continue in 2021?

Pandemic-led restrictions have hit economic growth. That is why RBI is focused on reviving growth. "If growth were to slump, we might see a further cut in rates. But hopefully, it won't come to that, particularly if RBI can push liquidity transmission through other initiatives and open market operations. Unless we see significant problems in revival of industrial output, we don't see a need for interest rates to fluctuate much in the near term," says Kunal Varma, CBO and Co-founder, MoneyTap.

Digital Lending

Lockdown restrictions have forced lenders to innovate and operate digitally. "From opening an account to approving a loan application in 5-10 minutes, banks will focus on improving internal processes and procedures," says Rishi Mehra, CEO, Wishfin.com.

Instant credit check facilitated by credit bureaus has already revolutionised underwriting. "CIBIL score and credit information solutions have enabled banks and credit institutions to give quick, easy and affordable access to credit for millions of borrowers," says Harshala Chandorkar, Chief Operating Officer, TransUnion CIBIL. Even lenders which have been taking digitisation lightly will be forced to come up with a consumer-friendly digital interface to do business.

Digitisation will also help lenders reward those with disciplined credit behavior. "This momentum of digital lending and use of data analytics-based solutions to drive access to finance will become stronger through 2021 and beyond," says Chandorkar of TransUnion CIBIL

Complete digitisation of loan disbursal and repayment processes is also going to become a reality as compliances go digital. "We hope to see initiatives such as video-KYC becoming more mainstream and being accepted as a primary option." says Kunal Varma, CBO and Co-founder, MoneyTap.

Options Ahead

Low interest rates mean it is a good time to accelerate debt repayment unless you plan to continue for tax benefits. Check the interest rate on the loan, and if it is high, ask your lender to lower it. If it is a floating rate loan, transfer it to a new lender offering a lower rate. "With home loan interest rates plummeting to below 7 per cent, borrowers can switch lenders if their existing rate is higher,"says Naveen Kukreja, CEO& Co-founder, Paisabazaar.com. In case of fixed rate loans like auto or personal loan, you will have to calculate the net benefit after considering the prepayment penalty and processing fee.

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