Notwithstanding the low level of delinquencies, there is a sign of risk build up in consumer credit, Reserve Bank of India(RBI) said in its latest financial stability report.
In November, RBI asked banks and non-bank lenders to maintain a higher risk weight for their exposure to unsecured retail loans. The risk weight on these loans has been increased by 25 percentage points.
At 8.2%, the relatively high vintage delinquency of personal loans indicates declining standards of underwriting. Also, 42.7% of customers availing consumption loans already had three live loans at the time of origination and 30.4% of customers have availed more than three loans in the last six months, RBI said in its report.
Around 7.3% of customers availing a personal loan below Rupees 50,000 had at least one overdue personal loan. Consumer-facing loans garnered momentum in the September quarter, with inquiry volumes increasing across product categories. Credit card and personal loan categories witnessed maximum inquiries, the report from RBI showed.
The quality of incremental credit has improved, with the share of below prime and new-to-credit borrowers declining at the overall industry level as well as at the bank group level. Similarly, portfolio performance continues to improve, with declining levels of delinquencies across lender groups.
Around 39% of loan originations were to the prime borrower segment in July-September, higher than 35% a year ago.