Retail Debt of Indian Households
- Total retail debt of Indian households1 has increased at a CAGR of 17% over the last 5 years, growing from ~Rs. 23 lakh crores as of Mar-18 to ~Rs. 42 lakh crores at the end FY22. It has further increased to ~Rs.46 lakh crores as of Sept-22.
- Debt of an Indian household2 on account of personal loans has increased from Rs.74,214 in Mar-18 to Rs.1,32,272 in Mar-22, growing at a CAGR of 16%. Income of an Indian household3 has increased at a CAGR of 7% over the same time period.
- Burden of debt and interest payments4 is on an increasing trend. It peaked in FY21 on account of COVID which led to widespread loss of livelihood.
- As the economy grows, with increased financial literacy and penetration, growth in number of fintech startups in the lending space, increase in number of credit cards, household debt for consumption purposes is likely to increase further. The hike in lending rates can dent this trend to some extent.
- According to RBI’s Bank Lending Survey, there could be some moderation in retail loan demand in Q4 of the current fiscal. However, bankers are upbeat for 1HFY24.
- CRISIL expects the retail GNPA of SCBs to remain range bound at 1.7-1.9% during FY23 and 1.6-1.8% during FY24.
Debt levels have increased faster than income
Debt and interest burden on a rising trend
NBFC’s share in retail loans has increased
Housing and vehicle form the major chunk of retail loans
1. Personal Loans o/s of NBFCs and SCBs
2.Nominal GDP/Number of households
3.Retail loans/Number of households
4.Annual interest outflow by a household
Source : CMIE, RBI
GNPAs for SCBs have fallen
Education and credit card loans - the most risky
Rates are on an upward trend
Bankers expect some moderation in retail loans in Q4FY23
*Data taken from RBI Bank Lending Survey. Net Response (NR) is computed as the difference of percentage of banks reporting increase/optimism and those reporting decrease/pessimism in respective parameter. NR ranges between -100 to 100. Any value greater than zero indicates expansion/optimism and any value less than zero indicates contraction/pessimism. Increase in loan demand is considered optimism
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Team:
Anuj Agarwal, Chief Economist
Ria Rattanpal, Research Associate
Author:
Ria Rattanpal, Research Associate
Komal Chavan, Marketing Associate
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