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Private sector banks accounted for 52.6 per cent of gross non-performing assets (NPAs) in unsecured retail loans during the year ended March 2025, the RBI’s Financial Stability Report (FSR) said. When compared to this, the share of PSU banks in gross NPAs in such loans was 40.5 per cent.
Gross NPAs of private banks in unsecured loans was below 50 per cent two years ago. Unsecured loans are provided without requiring any collateral and are commonly offered through credit cards, personal loans, and education loans. Private banks were aggressive in extending unsecured loans in the last two years.
Alongside, write-offs continue to remain a key contributing factor to NPA reduction in the unsecured retail portfolio, especially among private banks, FSR said. “Slippages in unsecured retail loans remain elevated for private banks (PVBs). Fresh slippage in unsecured retail loans continues to dominate the overall slippage,” FSR said.
Even as unsecured retail lending has moderated, its asset quality has relatively weakened compared to the overall retail portfolio with gross non-performing asset (GNPA) ratio at 1.8 per cent vis a vis 1.2 per cent in March 2025, it said. Post-pandemic, bank loan growth was largely driven by lending to the retail and services sector, particularly through unsecured retail loans and lending to the NBFCs, the RBI FSR said.
Unsecured retail lending forms 25.0 per cent of retail loans and 8.3 per cent of gross advances.
