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Stronger growth prospects, lesser competition, higher yields and profitability comparable to the larger cities make Tier-II markets an extremely attractive proposition for financiers, according to credit rating agency Crisil.
The rating agency expects increasing finance penetration and the entry of more players to drive growth in retail loan demand in Tier-II cities.
The growth prospects in 15 Tier-II markets — Bhopal, Coimbatore, Indore, Jaipur, Kanpur, Kozhikode, Lucknow, Ludhiana, Madurai, Mysore, Nagpur, Nashik, Rajkot, Thiruvanathapuram and Visakhapatnam — are extremely strong, Crisil said.
Loan disbursements
In its report, Crisil has assessed that car loan disbursements in 10 of the 15 markets are expected to grow at around 20 per cent CAGR (compounded annual growth rate) over the next two years as compared with 13 per cent CAGR in the larger cities.
In seven of the identified Tier-II cities, loans against property disbursements would grow faster than the rest of India.
Gold loans are expected to grow at a much faster pace (more than 50 per cent annually) in five non-Southern cities, said Mr Prasad Koparkar, Head-Industry & Customised Research, Crisil Research.
Despite lower volumes, these markets are as profitable as the larger markets on account of higher yields, especially in the case of housing loans and two-wheeler loans.
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