Home Loan Activity Slumps: 9% Decline In Origination Volumes In June Quarter

Home loan originations dropped 9 per cent in the June quarter, according to a report released on Monday.

From a value perspective, quantum of home loan originations was at par with the year-ago period, the report by credit information company Transunion Cibil said.

The outstanding balances on home loans grew only 14% during the quarter, making it the slowest growth across all categories which constitute retail lending, the report said.

Interestingly, the decline in origination volumes and the sluggish growth in outstanding balances came at a time when the incidence of non-payment of loans reduced during the quarter, the report said, pointing out that the advances overdue for over 90 days stood at 0.9% in June 2024, showing a 0.32% improvement.

"India's retail credit growth moderated in the quarter ending June 2024 as financial institutions tightened the supply of credit, particularly on consumption-led products like credit cards, consumer durable loans and personal loans," the report said.

The unsecured lending category comprising credit cards and personal loans, showed declines on various fronts.

The volume growth in originations declined 30 per cent in credit cards as against an 8% increase in the year-ago period, while in the case of personal loans, the volumes were up 3% and originations by value were at par.

It can be noted that the Reserve Bank of India is uncomfortable with the growth of unsecured lending, and introduced measures like increase in risk weights to temper the growth. The RBI management has claimed that the actions have had intended impact.

Meanwhile, the report also said lenders are more reluctant to lend to the new-to-credit customers, and the share of loan originations of such customers fell 4 percentage points to a record low of 12% during the June quarter.

Private banks had the slowest growth in outstanding retail loan balances at 18%, as compared to 22% for state-run lenders and 35% for non-banking financial companies.

The private banks' improvement in delinquencies was also the lowest among the three lending groups, it said.