The Non-performing assets (NPA) are on a rise in the personal loan space as the recent data from the Reserve Bank of India (RBI) highlighted that the highest default was in the education segment while the lowest was in housing.
According to the Financial Stability Report (FSR) for June 2024, NPA in education personal loans stood at 3.6%, compared to 1.8% in credit cards, 1.3% in auto loans and 1.1% in housing loans, the central bank’s Financial Stability Report (FSR) for June 2024 showed.
The report further highlighted that lending to the housing segment under personal loans grew 36.5% in March 2024. Notably, this was the highest among other sub-segments.
Credit card grew by 25.2%, education loans by 20.5%, and the other personal loans grew by 19.9%. The vehicle and auto loans grew by 18.3%.
Personal loans propelled growth of banks, NBFCs
The Indian banking sector recorded sustained improvement in capital positions, asset quality and profitability amidst strong business expansion, the RBI FSR said.
Credit growth remains robust, mainly driven by personal loans and lending to the services sector.
Lending by non-banking financial companies (NBFCs) moderated in the second half of 2023-24, especially personal loans, and asset quality improved further.
The report further said that the personal loans accounted for over half of Private Banks’ credit growth. The expansion in personal loans was broad-based, led by housing loans and followed by other personal loans.
The GNPA ratio in all categories of personal loans reduced across bank groups, the report said.
The RBI report further said that in terms of loans by NBFCs, the major categories in the personal loans segment like vehicle/auto loans (34.6% share in retail loans in March 2024), advances to individuals against gold (11.2% share), microfinance loan/ self-help group (SHG) loan (10.9% share) recorded lower growth than the overall growth of the personal loans segment.
