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Are Personal Loans Growing Fast in India? Here is the Statistics

Personal loans have got huge popularity in the past few years, the reason for this is surely the increasing gap between income and expenses coupled with rising aspirations. And for the year 2020, pay cuts and job losses due to the corona pandemic are also the key factors driving the Indian Personal Loan Market. Additionally, personal loans come with great features and wide availability which makes it easier for the masses to access. Furthermore, digitization (online availability) and the recent reduction in the cost of borrowing has positively influenced the personal loan market this year. 

According to the recent updates and RBI report, the share of personal loans in the total bank credit has grown to 24% from 16.6 %. 

But, loans to the industrial sector have also faced a decline from 41.2% to 30.6% in March 2020. The personal loans sector continued to grow at a steady and robust pace from the last five years. 

Here are some of the highlights which indicate personal loan growth:

  • As per the RBI report, personal loan accounts 28% of total bank credit as of 2020.
  • The last few years have witnessed growth in unsecured lending, especially among youngsters.
  • The growth rate is the same for consumer durable loans and personal loans. One of the reasons for this growth is fintech lenders offering loans either through partnerships with existing NBFCs or banks which made it easier for the customers to avail an unsecured/personal loan at affordable pricing without even visiting banks.  
  • Among the total loan accounts, female borrowers held 34.2 per cent of it in March 2020 as compared to 21.1% share in the last 5 years. 
  • The number of loan accounts with banks increased by 17.3% in 2019-20 which for sure shows an increased number of bank lending in the last year.
  • Personal loans grew up by 28% compared with 33.5% in the same period last year. 
  • However, with the increase in number, there has been a drop in average ticket sizes for personal loans offered by NBFCs. 
  • Among the increased 28% of the personal loan accounts in 2020, 37% of it were the customers who borrowed a personal loan due to emergencies like medical and health care.
  • The moratorium period offered by banks is a major factor that has helped most of the personal loan borrowers to maintain liquidity of funds when they are having loans on them.
  • Some of the consumers might feel it difficult to repay their ongoing loan after the end of their moratorium period.

Interest Rate & its impact on Personal Loan

The interest rate at which a personal loan is approved determines the cost of your borrowing. Lower the rate of interest lower will be the monthly outgo of EMI and vice-versa. 

So, this makes it important to choose a loan that comes at comparatively lower rates. And as per the RBI guidelines in view of the pandemic, personal loan interest rates have also been reduced which made it favorable for the borrowers to opt for this loan. This can also be a reason which has resulted in an increased number of personal loan borrowers. However, to get a personal loan at the lowest rates all you need is to compare the rates and choose the best lender for you. 

Remember the key to hassle-free borrowing is to choose the lender that offers the lowest interest rates on your loan. 

Well, this was all about personal loan growth statistics. To sum it up – the corona pandemic has shaken the economy to its core where millions have gone through unprecedented unemployment and pay cuts. In all these circumstances personal loans have proved to be a great savior for those people who are either under medical emergencies or going through an economically tough phase.

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