Retail-Led Credit Model Faces Headwinds as Home Loan Defaults Rise: RBI

ByRichard C. Sloan

Dec 30, 2021

Mumbai, December 29 (PTI) The Reserve Bank raised concerns over deteriorating credit quality in lenders’ retail portfolios and warned that the retail-led model of credit selling, led by home loans, is currently facing headwinds.

Between April and the first week of December, credit disbursements rose to 7.1 percent from 5.4 percent growth a year ago and 5.2 percent in March 2021, according to the financial stability report released on Wednesday. .

The report says that in recent years, wholesale credit growth has lagged; retail credit, on the other hand, has typically seen double-digit growth, although the pace of growth remains below the pre-pandemic level.

Home loans and other personal loans have made up 64 percent of additional credit over the past two years.

“The consumer-led credit growth model faces headwinds: First, defaults in the consumer credit portfolio have increased, and second, the new lending segment, a key driver of growth. of consumer credit in the pre-pandemic period shows a decline in origins, ”the report said.

The share of retail / personal loans made up 64.4 percent of incremental loan disbursements in FY21, compared to 64.1 percent in FY20. Of this total, housing loans accounted for 31.2% of the total additional appropriations in year 21, compared to 30% in year 20.


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