New Delhi
The unsecured lending segment, particularly app-based lending, may experience a slowdown in growth for several months following the Reserve Bank of India’s (RBI) cautionary measures, according to a report by Motilal Oswal Financial Services. RBI data indicates that the personal loan and credit card segments have reported a Compound Annual Growth Rate (CAGR) of 22 per cent over the past two years. The RBI monitors lenders to ensure balanced growth and issues cautionary notices if it perceives concerns about a particular segment. The caution from the RBI is specifically directed at consumer credit, where the collateral tends to be weaker compared to housing loans and vehicle finance, which have not faced similar warnings. The report notes that delinquencies in the consumer segments could impact lenders’ profitability. The move to curb the rapid growth in the consumer credit segment is expected to affect Non-Banking Financial Companies (NBFCs) and digital/Fintech lenders significantly, especially those without a diversified balance sheet. NBFCs may face challenges passing on the costs to customers, leading to potential margin pressures in the short term. While the RBI has presented strong data analytics and projections, the report highlights the absence of concrete data on default, speculating that the RBI may have observed worrying leading indicators that prompted this cautionary measure.
