Retail Loan Growth Moderates In Sept Qtr; Unsecured Loan Npas Go Up: Report

Retail loan growth slows in the September quarter as lenders tighten credit, with unsecured loans like personal loans and credit cards experiencing higher NPAs, according to Transunion Cibil report.
Retail Loan Growth Moderates In Sept Qtr; Unsecured Loan Npas Go Up: Report

Lenders tightened credit supply in the September quarter, leading to a slowdown in retail credit growth, a credit information company said on Tuesday.

The unsecured loans of personal loans and credit cards, which have come under intense regulatory scrutiny, showed an uptick in delinquencies during the quarter even as other asset classes within retail showed an improvement, the report by Transunion Cibil said.

Home loans, the bulwark for retail exposures for banks given the high ticket sizes, showed no growth at all in the September quarter origination volumes as compared to the year-ago period, while other classes like loans against property, auto, two wheelers, personal loans, credit cards and consumer durable loans showed slower growth, the report said.

It can be noted that over the many years, retail loans have seen a very high growth compared to corporate loans where the system took a hit due to non-performing assets. The retail exposures also present wider margins and lower delinquencies for lenders.

The quarterly report from Cibil said there was an improvement in balance-level delinquencies in all the assets, but for the unsecured loans, where there was a deterioration.

Personal loan delinquencies increased by 10 bps to 0.87 per cent in September as compared to the year-ago period, while the same for credit cards was up by 23 bps to 1.68 per cent.

The two-wheeler segment was the one with the largest delinquency level at 2.12 per cent as of September, but the same has improved by 0.28 per cent over the year-ago period.

In what can be concerning from financial inclusion and deepening of credit perspective, the data showed a decline in loan originations for new-to-credit consumers.

The share of NTC consumers in originations dropped to 14 per cent in September 2023 from 17 per cent in the quarter ending September 2022, the report said.

"India's evolving demography includes youth, women and consumers in the semi-urban and rural geographies who typically make up a larger share of first-time credit seekers. The decline in origination volumes for new-to-credit consumers is detrimental to the development of these consumer segments," the report said.

It attributed the sluggishness in home loan growth to a drop in lower-value home loans, pointing out that the under Rs 35 lakh sanction loan amount declined by 4 per cent.

Interestingly the over Rs 35 lakh category saw a 23 per cent increase in the volumes in September when compared to the year-ago period, the report said, attributing the same to an upward trend in property prices in 2023.

"Opportunities for growth in India's credit sector are abundant with emerging young consumers, untapped new-to-credit consumers as well as growth in rural and semi-urban consumer bases," the CIC's managing director and chief executive Rajesh Kumar said.

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