Bank loan

Retail-led lending model faces headwinds as mortgage delinquencies increase: RBI


The Reserve Bank has raised concerns about the deterioration of credit quality in lenders’ retail portfolios and warned that the consumer-led model of selling credit, led by home loans, is currently faced with headwinds.

Between April and the first week of December, credit disbursements rose to 7.1 percent from 5.4 percent growth a year ago and 5.2 percent in March 2021, according to the financial stability report released on Wednesday. .

The report says that in recent years, wholesale credit growth has lagged; retail credit, on the other hand, has typically seen double-digit growth, although the pace of growth remains below the pre-pandemic level.

Home loans and other personal loans have made up 64 percent of additional credit over the past two years.

“The consumer-led credit growth model faces headwinds: First, defaults in the consumer credit portfolio have increased, and second, the new lending segment, a key driver of growth. of consumer credit in the pre-pandemic period shows a decline in origins, ”the report said.

The share of retail / personal loans made up 64.4 percent of incremental loan disbursements in FY21, compared to 64.1 percent in FY20. Of this total, housing loans accounted for 31.2 percent of total additional credit in FY21, compared to 30 percent in FY20.