Delinquencies in Personal Loans Rise Steadily

Chennai: Personal loans have been witnessing a rise in both short-term and long-term delinquencies. Delinquencies have risen predominantly in personal loans of small ticket sizes.

Portfolio at Risk (PAR) between 31 and 90 days has moved up to 1.8 per cent at the end of September 2024 against 1.5 per cent in the year-ago month. PAR-91-180 has worsened from 1.1 to 1.2 per cent. Long term delinquencies of PAR past 360 days rose from 3.2 per cent to 3.3 per cent.

PAR 31-180 days has increased across geographies since March 2024. Top 8 cities saw an increase from 2.4 per cent to 2.6 per cent, top 9-50 cities saw it going up from 2.9 per cent to 3 per cent. Cities between 51 and 100 witnessed a growth from 3 per cent to 3.2 per cent and towns beyond 100 saw it growing from 3.3 per cent to 3.6 per cent, finds an analysis by CRIF and DLAI.

Among personal loans of less than Rs 10,000, par 31-90 days has gone up from 3.7 per cent to 3.9 per cent in one year, while PAR 91-180 is up from 5.9 per cent to 6.2 per cent. PAR 360+ rose from 24.5 per cent to 39.7 per cent.

Personal loans of value between Rs 10,000 and Rs 50,000 too have seen delinquencies rising. PAR 31-90 for this group rose from 2.6 per cent to 3 per cent and PAR 91-180 grew from 4.2 per cent to 4.8 per cent.

While originations value of personal loans decreased 5.5 per cent in H1FY25 compared to H1FY24, originations volume saw growth of 3.4 per cent due to an increase in smaller loans of less than Rs 10,000.

In the case of personal loans, NBFCs have gained dominance in originations with a value share of 38.7 per cent and volume share of 90.7 per cent in H1FY25. Private banks have seen declining shares in both value and volume.

Smaller cities increased their share in personal loans from 32.2 per cent in FY24 to 33.4 per cent in H1FY25, while top 8 cities saw declining share from 39.9 per cent in FY24 to 38.7 per cent in H1FY25.