The demand for consumer durable loans in metro cities has surged dramatically over the past five years, driven by robust consumer spending on electronic gadgets and home appliances. According to Reserve Bank of India (RBI) data, these loans have skyrocketed from Rs 6,061 crore in March 2019 to Rs 25,654 crore by March 2024, marking a staggering growth of 323%.
In rural, semi-urban, and urban areas, similar loans have also seen substantial increases of 55%, 84%, and 124%, respectively, over the same period. Despite these gains, the bulk of the growth remains concentrated in metro and urban regions, which now account for 77% of total consumer durable loans, up from 61% in March 2019.
The growth
The total portfolio of consumer durable loans across all regions has swelled from Rs 13,969 crore in March 2019 to Rs 40,432 crore by March 2024, indicating an overall growth rate of 190%. This surge has prompted regulatory concerns, with the RBI recently tightening risk weights on unsecured retail loans amid worries about the rapid expansion of personal and consumer loans.
RBI Governor Shaktikanta Das highlighted these concerns in a recent monetary policy statement, emphasizing the need for vigilance and potential additional measures to ensure responsible lending practices. The increased risk weights are aimed at bolstering capital requirements for banks and non-banking financial companies (NBFCs), thereby raising borrowing costs for consumers.
Financial experts caution that banks should diversify their lending portfolios to mitigate risk and enhance financial stability. They stress the importance of maintaining robust underwriting standards through investments in governance and technology, crucial to sustaining loan quality amidst rapid expansion in consumer lending sectors.
