Unsecured Personal Loans Jump Four-Fold to Rs 13.32 Lakh Crore

In a recent report, it has been revealed that unsecured personal loans in India have witnessed a substantial increase, growing more than four-fold from Rs 4.26 lakh crore in March 2017 to Rs 13.32 lakh crore in March 2023. This remarkable growth has been accompanied by a significant increase in the overall number of personal loans, which has nearly tripled during the same period, reaching Rs 51.7 lakh crore.

Surge in Personal Loan Books

The analysis conducted by Care Ratings indicates that the personal loan books of banks and non-banks have grown by 1.5 times between FY17 and FY23. As a result, personal loans now constitute a significant portion of the overall credit, accounting for 30.3 percent of the total Rs 170.5 lakh crore as of March 2023. In contrast, at the end of FY17, personal loans accounted for 21.5 percent of the overall loan book, amounting to Rs 18.6 lakh crore.

Growth of Unsecured Loans

Among the various types of personal loans, unsecured loans have experienced a particularly noteworthy increase, growing more than four-fold from Rs 4.26 lakh crore in March 2017 to Rs 13.32 lakh crore in March 2023. This surge represents a growth rate of 23 percent in the final year over FY22, when the amount stood at Rs 10.81 lakh crore. The report attributes this remarkable growth to deepening income crises and the aggressive push of credit by fintech companies and their NBFC lending partners.

Impact of RBI's Risk Weight Hike

The Reserve Bank of India's (RBI) recent move to increase the risk weight by 25 percentage points aims to deter high consumer credit growth and is expected to impact the momentum in the growth of personal loans in the immediate to near term. Despite this measure, the overall credit of banks and NBFCs has grown significantly, expanding by 12 percent annually from FY17 to FY23 and witnessing a growth of over 23 percent during the current fiscal year.

The substantial growth of unsecured personal loans in India reflects the increasing demand for credit among consumers. However, the RBI's recent risk weight hike may moderate the pace of growth in the near future. Nonetheless, the overall credit landscape continues to expand, playing a vital role in driving economic activity and facilitating financial inclusion in the country.