'Worried over high growth in personal loans'

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₹47.7 trillion in August, from ₹36.47 trillion the year earlier. Credit to the sector increased 17% to ₹47.70 trillion in August from ₹40.85 trillion in April, significantly surpassing last year’s 7% growth rate for the same period. Within this, credit card outstanding grew by 30% compared with 26% a year ago.

Vehicle loans saw a 21% growth, and loans against jewellery grew by 22%. According to RBI, personal loans contributed 38% of incremental bank credit in August. “In the last couple of years, year-on-year growth in retail credit has been close to 30% in most institutions.

On average, unsecured retail growth has been 23%. In the context of the rest of the credit growth, which is anywhere between 12-14%, it looks to be an outlier. It’s our intention to inform banks this is an outlier level of growth," said J.

Swaminathan, deputy governor of RBI. “This is a general system level advisory so that banks and NBFCs tighten their internal prudential measures and grow their portfolio sensibly." Das, however, noted that the Indian banking system continues to be resilient, backed by improved asset quality, stable credit growth and robust earnings growth. According to a report by India Ratings in August, non-banking financial companies (NBFCs) have increased the proportion of collateral-free loans in their portfolio in search of higher yields to offset the impact of higher borrowing costs.

According to the data of 12 large NBFCs compiled by the rating agency, the share of unsecured loans jumped to 30% of total assets under management in FY23 from 26% in FY22 and 23% in FY21. The assets under management of these unsecured loans grew 51% yearly during fiscal year 2023 as against 30% during FY22 and -2% during FY21. In comparison,