Consumer lending is growing at a healthy pace in India, driven by evolving lifestyle preferences where consumers strive for a higher standard of living and access to modern amenities. The country’s growing economy, rising disposable incomes, and increasing financial literacy resulted in higher disbursals of consumer loans and personal lending in 2023.
Card lending, driven by credit cards, remains the dominant category within consumer credit in gross lending terms, used by many consumers to purchase big-ticket items that they would not normally be able to pay for in full using their debit accounts. In 2023, the adoption of credit cards further increased as consumers’ responsibilities in the form of expenditure grew rapidly, which pushed them to choose such financial instruments for purchases as they offered better flexibility of payment.
Mainstream financial service providers, comprising both public and private sector banks, have a strong foothold over the competitive landscape of consumer lending in India. While public banks tend to focus on offering mortgages/housing loans, private banks have a significant presence in card lending, driven by credit cards.
The apex banking institution, Reserve Bank of India, in a bid to keep unsecured consumer credit levels in check, tightened regulations around unsecured lending by hiking the “risk weights” by 25% points in 2023. In 2022, it had already restricted non-banking financial companies (NBFCs) from loading pre-paid instruments with credit lines and in 2023, increased the minimum amount which NBFCs and banks must hold in relation to issuing unsecured loans for ensuring financial stability of the economy.
The government’s initiative for financial inclusion in India is encouraging an increasing population to adopt formal banking, which in the coming years will contribute to robust growth in consumer lending. As the banked population grows and the government pushes towards a cashless society, rising numbers of consumers are expected to apply for card lending products, with this category set to remain the most dynamic performer.
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Consumer Lending
Aggregate of Consumer Credit and Mortgages/Housing. Gross Lending: The total value of loans advanced by institutions in a given year; data refers to single year only. Outstanding Balance: The collective amount owed by borrowers at the end of a given year; data refers to the cumulative impact of debt.
See All of Our DefinitionsThis report originates from Passport, our Consumer Lending research and analysis database.
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