Data Focus: Personal Loans Show Strong Growth as Delinquency Levels Decline

While the first year of the pandemic impacted loan growth across all categories, there was a strong rebound in personal loans thereafter. From Rs 3.35 lakh crore in 2020-2021, these loans increased to Rs 4.66 lakh crore in 2021-22, registering a growth rate of 39%. Personal loan momentum continued in April 2022, with consumers showing a propensity to borrow across all segments.

Growth at all levels

Home loans, which represent more than a third of loans to individuals, recorded growth of 13.7% in April 2022, compared to the corresponding month of the previous year. “During the current phase of the economic recovery, the housing market has also regained momentum, boosted by a combination of easy financial conditions and a favorable political environment. As a result, housing sales have increased and new launches have multiplied, although there has been some disruption around the emergence of Omicron in Q4: 2021-22,” the stability report states. finance of RBI.

The culture of borrowing and spending is also back. This is reflected in growth of 20% in credit card loans and 18.9% in other personal loans. The surge of 65% in consumer durable loans shows that consumers are also starting to buy non-essential items, which is a good signal for the economy.

A 2.9% reduction in gold loans shows less stress among middle and lower class borrowers. This category of loans had seen a sharp rise during the closings caused by the pandemic.

Optimistic consumers

Consumer sentiment can be measured from the RBI Consumer Confidence Survey. The latest round of the survey conducted in May 2022, covering 6,027 responses, shows that consumers’ view of the economy and inflation is negative, but they intend to increase their spending in the current period as well as in the future period.

Sentiment is most negative on inflation, with the index deteriorating from -92.1 in March 2022 to -94.9 in May 2022. While inflation is expected to moderate slightly after a year, it is expected to remain a source of concern.

But consumers are quite confident about their spending, with 60.9% of respondents expecting them to increase spending in the May survey. The scale of spending is expected to improve further in the future, with 66.7% of respondents expecting to increase spending in a year.

less crime

Another indication of the improvement in consumption is the reduction in delinquencies in consumer credit. RBI’s FSR shows that default levels based on loans, which were due more than 90 days after their due date, were high between May and July 2021. But they gradually improved thereafter.

Around 5.71% of consumer credit in public sector banks was overdue in May 2021. This figure had fallen to 4.45% in March 2022. The improvement was more marked among private sector banks, delinquent loans dropping from 2.48% to 1.4%; while in NBFC/HFC it fell from 5.08% to 2.34%.

The drop in delinquencies shows that consumers are in a much better financial position to take out more loans.

Published on

July 08, 2022

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