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We hosted webinar with the CRIF Highmark team, including Chairman Sachin Seth and Head of Research Abirami B, to discuss the growth/asset-quality trends in consumer and small business loans. Key takeaways:

Unsecured loan remains in the slow lane on AQ pressure and regulatory salvo

Unsecured loan growth has slowed sharply, as asset-quality pressures and early regulatory interventions still weigh on the segment. Both PL and credit cards recorded moderate growth of 8.7% YoY and 12.4% YoY as of Jun-25, respectively, as lenders recalibrated risk frameworks, scaled back originations, and tightened underwriting standards to manage rising delinquencies. Origination trends in PL showed clear polarization, with 83.5% of volumes concentrated in BNPL-type loans below Rs50k, while loans above Rs100k accounted for 81.2% of origination value, highlighting dependence on considerably small- as well as large-ticket segments. In cards, new issuances fell 28% YoY, marking a continued correction after years of rapid growth, and reflecting a sharper focus on asset quality. PVBs remained dominant, with ~75% share of new card originations, though their absolute origination volumes declined ~25% YoY. Meanwhile, NBFCs continued to drive growth in unsecured loans, including business loans, although rising delinquencies pose a risk.

Slower mortgage growth with hopes of some revival; GL/LAP continue to shine

Mortgage growth remains subdued, with the home loan portfolio expanding by a modest 12.8% YoY as of Jun-25, reflecting steady albeit below-trend momentum. Origination volumes have been soft at 5.2% YoY, particularly in mid-ticket categories (Rs0.5-3.5mn), though PSU banks have supported growth by offering competitive pricing and increasing their share of disbursements. A revival in mortgages is anticipated, as affordability improves and interest rates ease, with demand expected to remain strong in premium housing while medium-size loans are set to make a comeback. In contrast, secured products such as GLs and LAP continue to outperform. GL surged 35% YoY in Jun-25, driven by higher gold prices and rising borrower preference for liquid, collateral-backed credit, while LAP also maintained healthy growth. Together, gold loans and LAP remain the bright spots in secured lending, offering resilience in a cautious credit environment.

Asset-quality stress concentrated primarily in micro loans (MFI, PL, SBL)

While MFI asset quality is improving under stricter MFIN guardrails (>3 lenders’ share declined, from 12.2% in Mar-25 to 10% in Jun-25, though still high), the rising overlap with retail individual loans (~17%) warrants cautioon. PSBs a nd PVBs have moderated personal loan growth, though NBFCs continue to drive expansion while facing rising stress in low-to-mid ticket PL. Over 50% of PL borrowers hold >3 loans, with delinquencies climbing in the <Rs10k (primarily BNPL) and the Rs0.2–0.5mn ticket sizes. Stress is geographically skewed in BR, GJ, and southern states (AP, TL, TN), where borrowerindebtedness is more acute. In Credit cards, new stress flow rates are improving, though late buckets - PAR 180+ inching up to 7.7% in Jul-25 (from 7.4% in Jun-25) and may thus lead to continued elevated credit cost. Unsecured business loans segment is emerging as a new stress pocket, with earlier bucket pools on the rise mainly for NBFCs and SFBs. It is too early to witness any impact of US tariffs on the SME segment, though it could show up in coming quarters

Cautious banks, aggressive NBFCs – Credit Cycle at a crossroads

Per CRIF, NBFCs continue to go full throttle on the growth front, though asset quality remains an irritant and needs to be watched. On the other hand, credit growth for banks remains moderate amid continued slackness in corporate lending, while risk aversion keeps growth in unsecured retail loans under check. SME remains the only growth engine for banks, which too face some asset quality noise, calling for caution. This, coupled with continued margin pressure and elevated credit costs for select banks, will keep the sector momentum in check. Within banks, we continue to prefer banks with a better growth trajectory/expectation and that carry a healthy shock absorption capacity. Thus, we prefer HDFCB and ICICIB in large PVBs, and SBI, BOB, and Indian Bank among PSBs.

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