Small-Ticket Loans Show Higher Delinquency Rates

Recent data from the September quarter of FY25 reveals that personal loans under Rs 10,000 have a higher default rate compared to larger loans. This trend is particularly noticeable among loans issued between December 2023 and June 2024. The majority of these loans were originated by NBFCs, targeting new borrowers in areas outside the top 100 cities.

Financial Inclusion Through Digital Lending

The increase in small-ticket loans is part of a broader effort to promote financial inclusion through digital lending. Despite the higher risk associated with these loans, they play a crucial role in bringing underserved individuals into the formal credit system.

Steady Demand for Loans Under Rs 10 Lakh

In the segments of unsecured business loans (UBL) and loans against property (LAP), the demand for loans under Rs 10 lakh remains steady. These loans significantly contribute to the volume share, with a notable portion originating from cities beyond the top 100, indicating growing participation from smaller urban and rural areas.

Adverse Macroeconomic Trends Impact Loan Originations

Subhrangshu Chattopadhyay, whole-time director at CRIF High Mark, points out that adverse macroeconomic trends have led to slower growth in new loan originations and rising delinquencies after March 2024. The RBI’s Financial Stability Report highlights the need for sustainable growth in unsecured lending amidst rising household debt.