Why global market declined and how does it affect your loan approval process for salaried customers?
Global market on Monday saw a drastic change and most of the economy of the entire world saw a deep decline. The global market declined and the main contributor for this economic slowdown is China. The carnage began with an 8.5% drop in China’s Shanghai Composite index. Following the suit, the markets in Japan, Korea and Australia followed the same.
Chinese Market Slowdown
For the past 25 years, the Chinese Economy has been a main part of the World Economy and has a significant contributor. For the past several years, Chinese Market has been impressive and has seen a growth of 7% to 8% annually. The export-oriented development strategy which put Chinese people to work, making products for international companies are one of the significant factors for the significant contribution in the world economy. But, with inherent limits, the country with high living standards, it is becoming harder to compete with other low-wage countries. Thus, the need is to diversification of the economy, and the need to produce more goods and services for domestic consumption rather than for export.
Thus, an internally driven growth is needed within the country, which is not possible owing to different reasons. Thus, for past some years, the slowdown in Chinese market can be seen, which is in fact, the primary reason for the slowdown and yesterday’s slump was an example of the really critical situation of China.
Another reason for global market decline
Another reason for the slump can be attributed to the thing of the past. Many Western countries are still suffering an economic hangover from the 2008 financial crisis. Generally, central banks fight recessions by the process of cutting interest rates. But as both in the United States and the Europe, short-term interest rates have already fallen to zero, thus making these techniques ineffective.
Effects on loan approval process for salaried customers
With the period of uncertainty coming again in the market, the fear of losing jobs and many such crises comes again. People along with the lenders are reluctant to loans. Those people who have already applied for loans, the bank have to reassess their criteria. The reassess of whether the person can have any issue regarding the repayment of loan amount is one of the effects because of the economic slowdown. People may lose their jobs and in that condition, the EMIs along with the repayment become an impossible. Thus, banks have a fear of losing their money. Many Banks tend to take time for the approval of a loan application by playing a wait and watch game and then making a decision of approval or un-approval of loan.
Thus, with the economic slowdown, the loan rejection cases may see an upward movement, while loan application seeing the drop as people feels unsafe while taking loans.