The quarterly average ticket size of loan disbursal by Micro Finance Institutions (MFIs) increased by 43% from Rs. 35,000 to Rs. 50,000 (US$ 406.47- 580.67) between September 2021 and 2024, according to the Financial Stability Report by IIFL Capital. However, the report raised concerns over delinquencies, particularly among borrowers with loans from multiple lenders or higher credit exposure. It revealed that nearly half of the unsecured loan borrowers also had another live retail loan, often a high-ticket loan. Around 11% of borrowers with personal loans exceeding Rs. 50,000 (US$ 580.67) had overdue loans, and over 60% had taken out more than three loans during FY23. In Q2FY25, nearly 60% of personal loan borrowers had more than three active loans at the origination, contributing to rising impairments in unsecured loans.
The report also noted that lenders have been tightening credit filters following the implementation of higher risk weights in November 2023 and increasing asset quality stress. This has led to a moderation in inquiry volumes and approval rates, a rise in the share of prime customers, and a pullback in personal loans to lower-income groups. In FY24, banks opened 5,400 branches, the highest since FY16, with 42% in centres with populations under 50,000. Private banks accounted for two-thirds of these new branches, with 45% in underserved rural-urban (SURU) areas. The loan-to-deposit ratio (LDR) stabilised at around 80%, with loans and deposits growing by 11.5% YoY. Over the last three years, retail segments have been the key drivers of credit growth, while large corporations contributed only 5%. Indian banks are on a strong footing, marked by healthy loan compound annual growth rates, low NPA ratios, and improved capital and profitability metrics.
Disclaimer: This information has been collected through secondary research and IBEF is not responsible for any errors in the same.