Synopsis: Personal loan growth slowed to 13.8% YoY in H1FY25, compared to 29.1% in H1FY24, as per CRIF data. Non-Banking Financial Companies (NBFCs) led with 68.7% of active loans, while public sector banks held the largest share of portfolio outstanding at 37.8%. Origination value dropped by 5.5%, while volume rose 3.4% to 691.5 lakh loans.
India’s personal loan market showed signs of deceleration in the first half of FY25, with YoY growth slowing to 13.8% compared to the robust 29.1% recorded in H1FY24.
The data, released by credit bureau CRIF, highlights a mixed performance across various metrics, including origination trends, portfolio quality, and regional lending activity.
Market Share Distribution:
Public sector banks continued to dominate the portfolio outstanding with a 37.8% share, followed by private banks at 32.9% and NBFCs at 24.1%.
However, NBFCs led in the number of active loans, contributing a significant 68.7% share, overshadowing public sector lenders (14.3%) and private banks (13.2%).
Loan Origination Trends:
The total origination value of personal loans fell by 5.5%, from ₹4,26,727 crores in H1FY24 to ₹4,03,204 crores in H1FY25.
Despite this decline in value, the origination volume grew by 3.4%, reaching 691.5 lakh loans.
NBFCs dominated loan origination volume with 90.7%, while private banks and public sector banks held much smaller shares of 4.8% and 2.8%, respectively.
Shifts in Portfolio Quality:
The risk profile of personal loans shifted in favor of safer lending practices.
Very high-risk and high-risk portfolios declined from 25.2% in H1FY24 to 20.1% in H1FY25, while very low-risk portfolios grew to 59.7% from 52.1% during the same period.
Medium-risk loans also witnessed a significant drop.
Regional Lending and Delinquencies:
Lending activity continued to shift towards smaller towns and cities, which accounted for 38.7% of the total origination value.
However, rising delinquencies were observed across all geographies.
- In the top 8 cities, delinquencies rose from 2.2% to 2.6%.
- Smaller towns and cities saw overdue loans increase from 2.5% to 3.0%.
- Mid-sized urban centers ranked 51-100 experienced a rise from 2.8% to 3.2%.
Ticket Size Distribution:
Smaller-ticket loans remained a significant part of the market.
Loans under ₹50,000 accounted for 89.5% of the origination value.
Among these, loans below ₹10,000 dominated in terms of volume, contributing to 66.9% of disbursements.
Conclusion:
India’s personal loan market has entered a phase of cautious growth, with a focus on reducing risk and addressing delinquencies.
While NBFCs continue to lead in terms of active loans and origination volume, public sector banks hold the largest share of portfolio outstanding.
The shift towards smaller towns and cities and the dominance of smaller-ticket loans reflect evolving consumer behavior and lending practices.
However, rising delinquencies across geographies signal potential challenges ahead for lenders.
