Personal loan rose to Rs 37.7 lakh crore in 2022 despite interest rate hikes: Report

Retail credit trend: The demand for credit in India remained high despite rising rate hikes in the last one year. The outstanding personal loans rose to a whopping Rs 37.7 lakh crore as of October 2022, a report by BankBazaar, an online financial services provider, stated indicating that the economy saw a robust post-pandemic recovery. 

The report, Moneymood Retail Credit Trends, highlighted that personal loans have risen by 24 per cent y-o-y from Rs 7.8 crore to Rs 9.9 crore. Credit cards became indispensable as the first line of credit, the report noted. The credit card debt has gone up by 28 per cent from Rs 1.3 lakh crore to Rs 1.7 lakh crore.

The cash transactions showed a considerable dip as more people opted for digital modes of payments, like Unified Payment Interface.  

For 2023, the report noted that the momentum in retail credit growth would continue with inflation easing. Small unsecured loans will continue to grow quickly in the first two quarters. 

Surge in credit card spending 

In May 2022, the Reserve Bank of India noted that there were nearly 77 million credit cards outstanding in India, which was 23 per cent more than May 2021, and over a 100 per cent leap over May 2018 figures. The latest report by Bankbazar noted that credit cards, especially the co-branded ones, saw a bumper year in 2022 and the outstanding credit cards peaked at around Rs 8 crore, doubling over a five-year period. 

“Credit card spends got bigger, and interestingly, ATM cash withdrawals stagnated at 2020 levels,” the report highlighted. 

The report noted that credit card disbursals grew 103 per cent y-o-y. The reward cards grew 48 per cent, while the Premium cards remained the most favoured, which saw a 3X increase in spending. Fuel cards offered by banks grew 22 per cent as petrol costs spiked, and offices reopened after the lockdown restrictions were lifted. 

Home loan trends 

The report noted that during the lockdown and pandemic period, Indians showed interest in buying homes, where cheaper loans and government subsidies helped. The trend continued in 2022, despite the rising interest rates. The RBI has noted that home loans have grown 8.4 per cent between March and October, which is much faster than the preceding six-month period during which there were no hikes. The RBI raised the repo rate by 35 basis points on December 7, 2022, bringing the rate up to 6.25 per cent and marking the fourth hike or repo rate increase in 2022.