Surge in Unsecured Loan Slippages: Impact on Retail Lending Revealed

The Reserve Bank's latest report highlights a significant rise in loan slippages predominantly from unsecured products like credit cards and personal loans. Private sector banks are experiencing more challenges in this segment. While overall non-performing asset ratios remain stable, private banks show higher slippages than state-owned banks.

The Reserve Bank report underscores an alarming trend: the majority of loan slippages are emanating from unsecured products such as credit cards and personal loans. This segment is causing substantial challenges, particularly for private sector banks.

Private lenders are facing more difficulties compared to their state-owned counterparts, despite the overall non-performing assets ratio from the unsecured portfolio staying steady at 1.8 percent. This is notably higher compared to the 1.1 percent ratio for total retail advances.

Fintechs are playing a pivotal role in this development, as unsecured loans form more than 70 percent of their total loan books. These loans predominantly target borrowers under 35, and fintechs witnessed a significant growth driven by personal loans.

(With inputs from agencies.)