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Personal Loans Witness 30% Growth Despite RBI’s Warning on Unsecured Credit


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Personal loans have emerged as the fastest-growing segment of bank credit, even as the Reserve Bank of India (RBI) expressed concerns over the rising volume of unsecured loans extended to individuals.

Data released by the RBI for September revealed a 30.4% year-over-year growth in personal loans, surpassing the overall non-food credit growth of 20%. This growth outpaced advances to the industry (7.1%) and the services sector (25.1%), which primarily comprises loans to non-banking finance companies. The data incorporates the merger of HDFC into HDFC Bank.

According to CareEdge Ratings, personal loans constitute the largest segment of bank credit, accounting for a 34.1% share. The September growth was fueled by a combination of the HDFC merger and an expansion in credit card outstanding.

The growth in the personal loans segment is attributed to factors such as the miniaturization of credit, increased reliance on credit bureaus for expedited loan decisions, and a surge in e-commerce transactions. All major sub-segments within the personal loans category witnessed strong demand during the month.

However, excluding the merger, personal loan growth marginally moderated to 18.2% compared to 19.4% a year ago.

Housing loans witnessed the most significant growth, expanding by 37.3% compared to 15.9% a year ago. This growth was primarily driven by the merger. Excluding the merger, housing loan growth would have decelerated to 13.8% due to a high base effect, a 250 basis point hike in the repo rate, and sales of high-value residencies.

Vehicle loans, on the other hand, registered a robust growth of 21.2%, up from 19.8% a year ago. This growth is attributed to the premiumization of the vehicle market and positive market sentiment.

Credit card outstanding remained elevated in September, reaching Rs 2.17 lakh crore, reflecting a 29.9% year-over-year growth.

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