RBI Concerned Over High Growth In Personal Loans

Recently, the governor of the Reserve Bank of India, Shaktikanta Das expressed concerns over high growth in personal loans and the build-up of risks as RBI sees personal loans as signs of stress. In addition, the central bank also cautioned against the very high growth in personal loans and lenders to rejuvenate their internal surveillance system. During the monetary policy speech, the RBI governor said that some components of personal loans are at very high growth and these components are being closely monitored for any signs of incipient stress by RBI. Shaktikanta Das said, “Certain components of personal loans are, however, recording very high growth. These are being closely monitored by the Reserve Bank for any signs of incipient stress,” Shift to the next section and unravel more details about worrying high growth in personal loans.


It was the first time when the central bank expressed its concern over the substantial growth in personal loans. During the monetary policy speech, Shaktikant Das cautioned banks about their increasing unsecured loan portfolio. Data shared by the Reserve Bank of India depicted that personal loans in August surged by 30.8 percent which was 19.4 percent a year ago. In August, the credit to the segment stood at Rs 47.7 trillion which was Rs36.47 trillion a year ago.

RBI claimed that in the August month personal loans led to 38 percent of incremental bank credit. Deputy governor of RBI J. Swaminathan said, “In the last couple of years, year-on-year growth in retail credit has been close to 30% in most institutions. On average, unsecured retail growth has been 23%. In the context of the rest of the credit growth, which is anywhere between 12-14%, it looks to be an outlier. It’s our intention to inform banks this is an outlier level of growth. This is a general system level advisory so that banks and NBFCs tighten their internal prudential measures and grow their portfolio sensibly.”

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Showing its concern over the increasing growth of personal loans, RBI said the credit to the sector raised 17 percent taking it to 47.70 trillion in August from 40.85 trillion in April. It surpassed the growth rate of 7 percent for the same period last year. Kindly note that loans against jewelry grew by 22 percent and vehicle loans saw a 21 percent growth. The Indian banking system is resilient backed by improved asset quality, strong earnings growth, and stable credit growth. Stay tuned.

Amzad Khan
Amzad Khan

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