India's mid-sized banks hop on personal lending bandwagon

Personal loan balances are expected to grow at a CAGR of 16% for 2018-2022.

India’s tier 2 banks are steadily beefing up their consumer lending portfolios to cater to a personal loan balances sector that’s poised to expand at a compound annual growth rate of 16% from 2018-2022, according to research firm GlobalData. 

The sector earlier booked a CAGR of 18% from 2013-2017.

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The advent of latest technologies coupled with an increase in average annual wages and change in lifestyle of the younger population are poised to popularity of personal loans in india as well as the ongoing digitisation of the loan application process.

“From e-KYC to disbursal, the process is going to get more seamless and hassle-free, thereby increasing the number of people opting for it,” Resham Karira, retail banking analyst at GlobalData said in a statement. 

In fact, a number of fintech companies and government initiatives like Aadhaar have been working to facilitate the consumer loan application process in a bid to cater to the high growth potential of the payments market.

The shift towards the personal loans segment, however, does not come without risk. “Mid-ranking banks have responded by increasing their risk appetite, and are experiencing rising loan impairments as a result. This not only demonstrates massive growth but also the potentially risky lending practices in terms of aggressive lending and an inability to correctly assess the repayment capacity of borrowers,” added Karira.