Lenders brace for a midsummer's nightmare as IMD flags heatwaves
India Meteorological Department (IMD) issuing heatwave warnings for various regions, banks, non-bank lenders, and payment companies are bracing for a challenging summer ahead. Lenders expect a decline in collection efficiency by more than a percentage point and a drop in loan disbursals and customer sign-ups due to less active sales teams in the field.
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To address these challenges, many are adopting more digital tools for collections and sales, reducing the need for physical presence. Additionally, several lenders plan to tighten their underwriting standards for industries they expect to be heavily impacted by the heatwave.
«Climatic conditions are a growing concern, especially when you consider how weather patterns have evolved over the past 2-3 years,» said Manish Kothari, president and head of commercial banking at Kotak Mahindra Bank. «We have become more agile in adjusting our underwriting policies and preparing for collections. We've enhanced our data analytics to better identify early trends and make risk-based underwriting decisions, as certain cohorts will be more affected than others. We need to quickly pivot our business strategy to address these shifts.»
According to the India Meteorological Department, January 2024 was the third warmest in the past 125 years, with the all-India mean temperature 0.94°C higher than the historical average
