Demand for personal loans continued to show strong growth in July 2022, registering growth of 18.8% compared to July 2021. Outstanding personal loans stood at ₹30,24,152 crore towards the end of July 2021, but this increased to ₹35, 94,016 crore by July.
Loans across all categories showed strong growth, with consumer durables registering the strongest at 69.8%.
This increase comes despite the fact that the Reserve Bank of India (RBI) started its rate hike cycle in May and raised the repo rate by 140 basis points between May and August. Between July 2021 and July 2022, the big banks also raised their interest rates on loans in most categories.
Grow in tandem
Home loans account for the largest share of personal loans, at 49%. Rising demand for housing with the recovery of the economy appears to have led to strong growth in such loans in 2022, rising from ₹15,22,703 crore in July 2021 to ₹17,69,249 crore in July 2022. This despite the shift in interest on housing loans from 6.7% to 7.55% for the country’s largest lender, the State Bank of India.
Other personal loans are the second largest category with outstanding loans of ₹9,34,025 crore. Demand remained strong during the pandemic as borrowers used these loans to deal with financial difficulties. These loans also continued to be requested this calendar year, registering a 22% increase year-on-year. This is despite interest on personal loans dropping from 9.6% to 10% over the past year.
After a decline in 2019 and 2020, vehicle sales picked up in 2021, according to data from Vahan. However, car loans also continued to grow by 19.2% between July 2021 and 2022. Currently, the outstanding car loan amount is ₹4,38,973 crore.
After a decline in 2019 and 2020, student loans increased by 19.5% in July 2021 and by 9.4% in July 2022. The year 2021 also saw an increase in the number of students who went to school. foreigner to pursue studies, according to data from the Ministry of Foreign Affairs.
Krishnan Sitaraman, Senior Director and Deputy Director of Ratings, CRISIL Ratings, cites floating bank loan rates as one of the reasons for the growth of the personal loan industry. They have not increased as much as the repo rate. “Last year we had ultra low interest rates to support the economy during the pandemic. Now that there is a recovery, inflation and interest rates have risen. However, it is still lower than it was in 2019,” he said.
Sitaraman also attributed it to the lower base rate, due to the second wave of Covid-19. While saying the growth of the sector will continue, he added, “The quantum may go down.”
September 20, 2022