Cautious Lending Trends Shake Up India's Festive Borrowing

A report highlights cautious lending during India's festive season, resulting in lower borrowing levels despite the usual peak. Challenges included rising household debt, tightened credit, and macroeconomic issues. Notably, home and personal loans saw minimal growth with varying performance across different lending institutions.

Recent findings reveal a trend of cautious lending by Indian financial institutions during last year's festive season, traditionally a peak period for borrowing. A report, released on Tuesday by credit information company Crif High Mark, highlighted a significant shift towards 'responsible and risk-conscious' lending practices.

Sachin Seth, chairman of Crif High Mark, noted that despite expectations of increased consumer loans in the third quarter of FY25, the lending scene appeared subdued. The report indicated that home loans saw only a 0.1% rise in value, while personal loan volumes decreased by 6.7%.

The restrained borrowing was largely influenced by tighter liquidity conditions, heightened household debt levels, and stringent regulatory standards. Additionally, many borrowers faced challenges like elevated interest rates and macroeconomic pressures. Interestingly, private sector banks reduced loan originations, while public banks excelled in auto and home loans, and NBFCs led in two-wheeler and personal loans.