
According to rating agency ICRA, the collection efficiency for personal loans has decreased from 95% in June 2023 to 93% in December of the same year. This can be attributed to higher spending by customers during the festival season and the relatively low priority given to personal loan repayment. It is important to note that personal loans are given without collateral.
Abhishek Dafria, the Senior Vice-President and Group Head of Structured Finance Ratings at ICRA, stated that the collection efficiency for personal loans is expected to remain at a similar level in the fourth quarter. In addition, the Reserve Bank of India (RBI) Governor Shaktikanta Das raised concerns about the high growth in certain components of consumer credit, including personal loans, in October 2023. The RBI advised banks and non-banking financial companies (NBFCs) to strengthen their internal surveillance mechanisms and address any risks associated with consumer credit.
In November of the same year, the regulator increased the risk weights for consumer credit from 100% to 125%. This means that lenders would need to set aside more capital for such exposures.
ICRA reported that delinquencies in securitized personal loan pools have remained within a certain range, with 90+ days past due (dpd) ranging from 1.6% to 3.4%. The outstanding pool of securitized loans in this category is approximately Rs 1,200 crore. Additionally, secured Small and Medium Enterprise (SME) pools have shown better collection efficiency and asset quality compared to unsecured SME pools.