Retail lending, which has led bank credit growth in recent quarters, has started facing headwinds with a rise in credit card delinquencies. While consumption-driven personal loan demand continues to grow, borrowers are lagging behind in repaying consumer durable loans and credit card dues, the report said.
“Credit performance remains strong. However, given the impact of global adversities, it is important to continue to carefully monitor credit risk, especially early defaults and leverage ratios,” said Rajesh Kumar, MD & CEO, TransUnion CIBIL.
Banks have been betting big on unsecured personal loans in recent months as rising interest rates have made high-ticket home loans unattractive. Household liabilities have also increased in recent months as a result of retail credit growth. A banker said they are monitoring the credit card glitch. The report noted stress in recent personal and consumer durable loan disbursements with “vintage delinquency” (accounts past due 30 days or more within six months of borrowing), a pre-pandemic period on these products. More than. As per the report, “serious delinquencies” (dues of 90 days or more) have improved across all products except credit cards.
In a sign that banks are turning cautious, loans to new-to-credit customers declined in the December quarter, while the share of prime and above borrowers (credit score above 730) increased. The report said that there has been a decline in the approval rates across all types of loans as lenders have shown greater caution as compared to previous quarters. For new-to-credit consumers, the approval rate declined to 24% in the December quarter from 32% in the year-ago period.
In FY23, unsecured loans grew 26% year-on-year, compared to a 15% growth in home loans, showed RBI data. In the first 11 months of FY23, the bulk of bank credit (Rs 4 lakh crore or 26% of fresh advances) went to personal loans, excluding home loans. In the same period, banks gave loans worth Rs 1.35 lakh crore to industries. As per the report, credit inquiries were led by young customers (18-30 years), while the share of demand from rural areas also increased marginally in the December quarter.