Home Loans Decline In Q3 Amid RBI's Caution Over Unsecured Lending
Growth in outstanding balances for home loans slowed to 13% compared to 15% in the year-ago period, as per a report released by TransUnion CIBIL.
Home loans witnessed a decline of 9% in volume and 3% in value during the December quarter, as reported by TransUnion CIBIL. Additionally, the riskier segments of personal loans and credit cards also saw a reduction in volumes.
The Reserve Bank of India has been cautioning lenders to decelerate on unsecured loans for several quarters due to concerns about potential risks. Despite this, home loans remain a critical segment for the economy, given their trickle-down effect on property purchases and their importance for banks' credit growth.
The report highlighted that growth in outstanding balances for home loans slowed to 13% compared to 15% in the year-ago period. The slowdown in balance growth was despite a 0.16% improvement in the home loans unpaid for over 90 days to 0.8% at the end of December, the report said.
Furthermore, the October-December 2024 period recorded the slowest credit demand growth in two years, mainly due to diminished demand from new-to-credit and prime consumers. Geographically, credit inquiries declined in metro areas, while semi-urban and rural regions experienced an uptick.
The share of total loan originations by NTC consumers fell to 17% from 21% in December 2023, with this decline consistent across key product categories.
As per the report, 41% of NTC borrowers are Gen Z or those born after 1995, and for 40% of the NTC, consumption-led products like credit cards, personal loans and consumer durable loans were the maiden foray into formal credit.
"The acquisition strategies adopted by lenders in response to risk-adjusted returns for unsecured lending products have disproportionately affected the NTC segment, which represents first-time borrowers," Bhavesh Jain, managing director and chief executive of the company, said.
The continued moderation in credit supply over the last four consecutive quarters led to growth in credit-active consumers slowing down to 9% in Dec. 24 from 16% in the year-ago period, the CIC added.
(With PTI inputs)
