In 2023, retail lending surged by 18% YoY, witnessing high growth in unsecured loans. According to the BankBazaar Moneymood Report, personal loans and credit card spending rose by 22% and 28%, respectively. The RBI’s move to increase risk weights impacted lenders, necessitating higher capital reserves for riskier loan categories.

The report highlights that India now possesses 94 million credit cards with an average transaction value of Rs 5,577, while the average disbursed personal loan amount in 2023 stood at Rs 1.71 lakh. Despite high-interest rates and inflation, credit demand remained robust.

The RBI’s intervention curbed excessive lending by imposing higher risk weights on credit cards, personal loans, and other categories, compelling lenders to set aside more capital reserves, thereby reducing their lending capacity.

The top four loan categories accounted for 92% of the debt, with housing and auto loans growing by 14.5% and 20% YoY, respectively, while personal loans and credit card dues expanded their share to 33%. However, there was a slowdown in consumer durable loans.

The BankBazaar Aspiration Index noted a sustained demand for home loans, yet the growth rate slowed, with average home loan ticket sizes rising. Similarly, personal loans grew by 22%, but their average ticket size declined.

Adhil Shetty, CEO of BankBazaar.com, commented, “In 2024, hopes are high of inflation easing… loans will be cheaper.” He also emphasized the impact of the RBI’s risk weight adjustments, stating, “The demand, especially for small-ticket loans, will remain high… the higher risk weights are going to have an impact on how fast unsecured loans grow.”

Shetty highlighted the trend of co-branded cards and collaborations driving credit card growth, stating, “In 2023, co-branded cards continued to be the flavour… in a time of shrinking rewards.” He anticipated credit cards remaining preferred for larger spends, with collaborations between fintechs and banks attracting new users.

In sum, the RBI’s interventions in risk weight adjustments reshaped the lending landscape, impacting loan categories and fostering cautious optimism about the future credit market trends.

In 2023, retail lending surged by 18% YoY, witnessing high growth in unsecured loans. According to the BankBazaar Moneymood Report, personal loans and credit card spending rose by 22% and 28%, respectively. The RBI’s move to increase risk weights impacted lenders, necessitating higher capital reserves for riskier loan categories.

The report highlights that India now possesses 94 million credit cards with an average transaction value of Rs 5,577, while the average disbursed personal loan amount in 2023 stood at Rs 1.71 lakh. Despite high-interest rates and inflation, credit demand remained robust.

The RBI’s intervention curbed excessive lending by imposing higher risk weights on credit cards, personal loans, and other categories, compelling lenders to set aside more capital reserves, thereby reducing their lending capacity.

The top four loan categories accounted for 92% of the debt, with housing and auto loans growing by 14.5% and 20% YoY, respectively, while personal loans and credit card dues expanded their share to 33%. However, there was a slowdown in consumer durable loans.

The BankBazaar Aspiration Index noted a sustained demand for home loans, yet the growth rate slowed, with average home loan ticket sizes rising. Similarly, personal loans grew by 22%, but their average ticket size declined.

Adhil Shetty, CEO of BankBazaar.com, commented, “In 2024, hopes are high of inflation easing… loans will be cheaper.” He also emphasized the impact of the RBI’s risk weight adjustments, stating, “The demand, especially for small-ticket loans, will remain high… the higher risk weights are going to have an impact on how fast unsecured loans grow.”

Shetty highlighted the trend of co-branded cards and collaborations driving credit card growth, stating, “In 2023, co-branded cards continued to be the flavour… in a time of shrinking rewards.” He anticipated credit cards remaining preferred for larger spends, with collaborations between fintechs and banks attracting new users.

In sum, the RBI’s interventions in risk weight adjustments reshaped the lending landscape, impacting loan categories and fostering cautious optimism about the future credit market trends.