FY25 sees a rise in high-ticket loans, growing stress in small-ticket lending, and evolving market share among banks, NBFCs, and fintechs
CRIF High Mark, a leading credit bureau in India and part of the global CRIF group, has released its annual report, How India Lends: FY25. The report provides deep insights into the credit landscape of India, emphasizing the influence of macroeconomic conditions, borrower behaviour, and lender strategies shaped lending trends over the past financial year. The report offers in-depth insights across key lending categories including Home Loans, Personal Loans, Two-Wheeler and Auto Loans, Consumer Durable Loans, Credit Card Loans, Microfinance, and more
FY25 witnessed a nuanced credit environment. While overall Portfolio Outstanding (POS) continued to grow, origination value growth moderated, signaling evolving borrower preferences and increased lender prudence. High-ticket loans saw stronger traction, while small-ticket lending slowed amidst rising inflation, affordability concerns, and tighter risk controls.
Public Sector Banks (PSUs) and NBFCs gained market share across multiple loan categories, even as private banks saw relative declines in select segments. Lenders sharpened their focus on risk management, with improvements in early-stage stress levels in some portfolios, though later-stage delinquencies—particularly in low-value and subprime segments—remain a concern.
Retail loans: A deep dive
In the home loan segment, origination growth slowed to 2.6% YoY as higher property prices and macro headwinds impacted volumes. PSU banks expanded their share in both value and volume, while private banks lost ground. Origination values shifted toward higher-ticket loans (₹75L+), and while early stress indicators improved across lenders, small-ticket loans below ₹5L continued to show elevated delinquency risks.
Personal loan originations declined by 2.6% in value, reflecting increased caution amid rising delinquencies. NBFCs gained market share significantly, and high-value loans (₹10L+) saw growth, even as lenders faced growing stress in the ₹1L–₹5L segment. Early and mid-stage delinquencies worsened across most lender types, except private banks.
Two-wheeler loan growth moderated to 10.6% in FY25, down from 25.1% in the previous year. Subprime borrower stress and tighter credit norms led to a rise in delinquencies across all lender types. PSU and private banks both witnessed an uptick in early and mid-stage PAR levels, indicating continued pressure in this category.
Auto loans grew just 5.2% YoY, a sharp decline from 15.3% in FY24 and 37.6% in FY23. This slowdown was driven by muted consumer demand and a high base effect in vehicle sales. High-value loans now account for nearly half of originations, with significant traction in the ₹10L–₹20L+ bands. PSU banks effectively managed risk across delinquency stages, while private banks maintained early-stage control but saw some deterioration in later-stage metrics.
Consumer durable loan originations saw a modest 3.3% growth in value despite 11.5% volume growth, with average ticket sizes shrinking due to inflation and stagnant real wages. NBFCs continued to dominate this space, accounting for over 80% of the origination value. The loan distribution remained concentrated in the ₹10K–₹50K range, with mid-value loans gradually gaining ground.
Credit card originations declined by 26.4% in FY25, following two years of strong growth. Private banks lost 1.7% share in new originations, indicating intensifying competition and a shift in credit card acquisition strategies.
A look at microfinance lending:
Microfinance lending saw a 13.9% YoY decline in Gross Loan Portfolio (GLP), driven by lender caution and strategic recalibration. While early-stage delinquencies improved, long-term risk remains high. NBFC-MFIs showed relative resilience, with a smaller QoQ decline, supported by Q4 originations. Tamil Nadu and Karnataka led the decline in GLP, while smaller ticket loans continued to contract.
Individual MSMEs saw a 4.5% rise in origination value, but volumes declined by 11.4%, suggesting selective lending at higher ticket sizes. The average loan size rose from ₹7.0L to ₹7.6L, reflecting demand for larger capital support. While private banks showed improvement in PAR 31–180%, other lender types experienced a continued rise in mid-term stress. PAR 181–360% remained stable, with NBFCs showing a marginal improvement.
“FY25 was marked by recalibration and resilience across the credit ecosystem. As borrowers gravitated towards higher-ticket loans and lenders adapted to evolving risks, we saw a deliberate shift in strategies aimed at managing portfolio quality while addressing changing consumer needs. ‘How India Lends’ serves as a critical lens to understand these shifts, offering actionable insights that empower financial institutions to navigate complexity, enhance financial inclusion, and build a robust credit ecosystem for India’s future” said Sachin Seth, Chairman, CRIF High Mark; Regional Managing Director – CRIF India and South Asia