India's Personal Loan Originations Surge 22.3% in Q4 2022 Despite RBI's Risk Weight Hike

India's personal loan originations surged 22.3% in Q4 2022, driven by strong consumer demand despite RBI's measures to curb risks in unsecured lending. The trend highlights the resilience of India's consumption-driven economy.

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India's Personal Loan Originations Surge 22.3% in Q4 2022 Despite RBI's Risk Weight Hike

India's Personal Loan Originations Surge 22.3% in Q4 2022 Despite RBI's Risk Weight Hike

India's personal loan originations rose 22.3% year-on-year in Q4 2022 to Rs 2.3 trillion, with consumer durable loans up 27.1% to Rs 39,900 crore, despite the Reserve Bank of India (RBI) raising risk weights on unsecured credit, according to a report by CRIF High Mark. The increase in personal loan originations occurred even as the RBI took regulatory action to enhance risk weights by 25 percentage points on such exposures, as well as on lending to higher-rated non-banking financial companies (NBFCs).

The report suggests that the rise in personal loan originations, particularly in the consumer durable segment, indicates continued consumer demand despite the RBI's measures to address risks in the unsecured credit market. The value of loans granted rose 13% year-on-year, with a shift towards smaller loans and a decline in average ticket size. Public sector banks dominated the market with a 37.4% share in value of originations, while NBFCs had a 71% share in volume.

Why this matters: The surge in personal loan originations, especially in the consumer durable segment, during the festive season highlights the resilience of consumer demand in India despite regulatory measures to curb risks in unsecured lending. The trend also underscores the growing importance of consumption-driven credit in supporting economic growth.

Auto loan originations increased 9% to Rs 88,600 crore, with the average ticket size rising to Rs 8.1 lakh. Two-wheeler loan originations rose 21% year-on-year to Rs 30,400 crore, with higher growth in rural and semi-urban areas. Mortgage loan values also rose nearly 9% year-on-year to Rs 2.5 trillion. The top 10 states contributed to 72% of overall originations, with Maharashtra seeing the highest originations across various loan segments.

The report also highlighted lending trends in major cities across India, with Delhi NCR leading in loan origination, followed by Mumbai and Bengaluru. Delhi NCR secured the top position with a total loan amount of Rs 61,482 crore, while Mumbai and Bengaluru also demonstrated significant demand for personal loans and home loans. "Credit demand during this period is not just limited to larger geographies, with Kanpur and Barabanki emerging among the top 10 cities by originations," the report noted.

Key Takeaways

  • Personal loan originations in India rose 22.3% YoY in Q4 2022 to Rs 2.3 trillion.
  • Consumer durable loans up 27.1% to Rs 39,900 crore despite RBI's risk weight hike.
  • Auto loan originations increased 9% to Rs 88,600 crore, with higher growth in rural areas.
  • Delhi NCR led loan originations, followed by Mumbai and Bengaluru, reflecting broad demand.
  • Lending trends show resilience of consumer demand despite RBI's regulatory measures.