Page 41 - BANKING FINANCE February 2024

ARTICLE

UNSECURED RETAIL

LENDING IN INDIA -

CAPTURING

EMERGING TRENDS

Abstract: Against this backdrop, this article delves upon the unsecured
retail lending landscape in India. It tries to inform the reader
In recent times, RBI has been vocal about the high growth
about what constitutes unsecured lending, the various
rate of unsecured retail credit in India as compared to the products and the size of this market. It also touches upon the
overall credit growth in the country. The RBI has termed
apprehensions of RBI regarding the high credit growth in
the unsecured retail credit an "outlier segment" as far as
general. A discussion is made regarding the following 4 key
its growth rate is concerned and has drawn the attention
concern areas of RBI viz. Sustainability of Growth, Unsurious
of banks and NBFCs in this regard. As part of regulatory
Pricing of loans by NBFC-MFIs,Over-reliance on Analytics and
intervention, RBI has also increased the risk weights
increasing interconnectedness of Bank -NBFC linkages.
associated with unsecured credit exposure of banks and
Furthermore, in trying to capture the emerging trends in
NBFCs. Post this development, the banking fraternity has
the unsecured retail banking space, the article explores the
been divided in their understanding of the ground realities.
evolution of digital finance and the contribution of fin-techs
On one hand, there is a school of thought which feels that
in the recent lending binge. Besides, it also underscores the
the recent surges in the unsecured retail lending in India is
backed by solid macros. Whereas, others feel that the more role of embedded credit products in developing an
ecosystem for providing appropriate and timely credit
than expected upsurge is a sign of incipient stress and might
delivery. The discussion revolves around the rising culture
pose systemic risk, if not dealt with an iron hand.
of credit driven consumption among the young population
of India (the digital natives) and its impact on the growth of
About the author
unsecured retail credit market in India.
Abhijit De
Chief Manager (Research) Introduction:-
State Bank Academy, Gurgaon
Back in August 2023, the Reserve Bank of India (RBI)

36 | 2024 | FEBRUARY | BANKING FINANCE