Decline in low-value home loans mars retail credit growth in Q2 of FY24: CIBIL data

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In the second quarter of FY24 (July-September) the growth of retail credit slowed down data from TransUnion CIBIL has revealed, The Times of India has reported.

Significantly, the Reserve Bank frowned upon the runaway growth of unsecured retail loans in this financial year and in November, it responded by raising their risk weightage, thereby forcing banks to raise interest rates on these loans to discourage consumption.

TransUnion CIBIL data has also showed that instances of defaults rose considerably in personal loans and credit cards during the same time period, which incidentally, was one of the crucial signals that goaded the RBI into action before the scourge of defaults weighed down on the banking system.

CIBIL data showed loan defaults increased personal loans and credit card domains. However, it improved in other categories. Default on payment of credit card bills rose 23 basis points to reach 1.7%. The personal loan space was marked by delayed payments. This delay rose 10% to tar 0.9% of the loan portfolio.

On the whole serious delinquencies at the balance level continued to improve across product categories, except for a slight deterioration in credit cards and personal loans. Serious delinquency is defined as dues remaining unpaid for 90 or more days.

The CIBIL data also showed that the deceleration in retail loan growth could be attributed to absence of growth in the home loan disbursements, which ironically is in the secured category. The deceleration in the home loan segment was due to decline in applications in the sub-Rs 35 lakh affordable housing category.

The sub-Rs 35-lakh category continued to suffer from degrowth of 4% in the July-September quarter when home loans registered a 9% growth in value terms (compared to the same period in 2022). It decelerated the growth of the home loan category in general.

The sector of home loan category that witnessed a spurt was the Rs 75 lakh-and-above segment. It rose by as much as 23% (on y-o-y basis). This segment used to constitute 7% of the home loan category by volume.

Interestingly, in spite of a high 27% (y-o-y) growth in outstanding balances in the personal loan space, its share in the overall retail credit portfolio witnessed a rise of 20 bps.

“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. To tap into these opportunities, lenders must identify deserving consumers and facilitate access to credit for them. Simultaneously, lenders must continue to prioritise strong underwriting practices and regular, nuanced monitoring of consumer behaviour to drive sustained credit growth and profitability,” Rajesh Kumar, managing director & chief executive officer, TransUnion CIBIL told the newspaper.