MUMBAI: Consumers have begun to feel the pinch of rising interest rates with home loan disbursals and demand dipping in the December quarter as compared to the previous year. Home loan disbursals decreased 6% in Q3 of FY23, while inquiries fell by 1%, said a report by credit information company TransUnion Cibil. Since May 2022, the RBI has raised its benchmark repo rate by 250 basis points (100bps = 1 percentage point) to 6. 5% — which banks have passed on to borrowers gradually. The minimum home loan rate is currently 8. 5% as compared to 6. 5% a year ago.
Retail lending, which has led the bank credit surge in recent quarters, has started to face headwinds with credit card delinquencies too rising. Even as consumptiondriven personal loan demand has continued to grow, borrowers are falling behind in repaying consumer durable loans and credit cards dues, said the report.
“Credit performance continues to remain strong. However, in view of the impact of global headwinds, it is crucial to continue to carefully monitor credit risk, especially early delinquencies and leverage ratios,” said TransUnion Cibil MD & CEO Rajesh Kumar.
Banks have been betting big on unsecured personal loans in recent months as rising interest rates have made high-ticket home loans unattractive. As a result of the retail lending surge, household liabilities have also risen in recent months. A banker said that they are monitoring credit card delinquencies. The report noted stress in recent personal and consumer durable loan disbursals with “vintage delinquency” (accounts 30 days or more past due within six months of borrowing) on these products being higher than the pre-pandemic period. “Serious delinquency” (90 days or more past due) improved across products, except for credit cards, according to the report.
In a sign that banks are turning cautious, loans tonew-to-credit customers declined in the December quarter while the share of primeand-above borrowers (credit score more than 730) increased. Approval rates have dropped across all loan types as lenders showed more caution than in prior quarters, the report said. For new-tocredit consumers, approval rates reduced to 24% in the December quarter from 32% in the year-ago period.
In FY23, unsecured loans increased 26% year-on-year as compared to 15% growth in home loans, RBI data showed. In the first 11 months of FY23, bulk of bank lending (Rs 4 lakh crore or 26% of fresh advances) went into personal loans, excluding home loans. In the same period, banks lent Rs 1. 35 lakh crore to industries. According to the report, credit inquiries were led by young customers (18-30 years), while the share in demand from rural areas also increased marginally in the December quarter.