A slow increase in unsecured loans will become dangerous going forward

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Mumbai: In the current financial year, the income of the country's banks may be increasing and the gross non-performing assets (NPAs) may be decreasing, but the unsecured credit portfolio of the banks is also increasing, which may become a concern for the financial system of the country going forward. However, the growth of unsecured credit has slowed down.

Banks are eager to provide unsecured credit due to high interest rates

The unsecured credit portfolio of some banks has been seen increasing in the results announced for the third quarter of the current financial year.

A rise in unsecured credit portfolios means bad loans may rise again in the near future, an analyst said. The proportion of unsecured credit in bank portfolios was 35 percent in 2023, which was 25 percent in 2007.

In view of the increase in unsecured credit, the Reserve Bank recently increased the risk weight for banks and NBFCs.

The pace of unsecured credit growth has slowed in recent months since the move in November last year, although growth has continued. Which can be dangerous going forward.

Analysts also added that unsecured credit remains profitable for banks due to high interest rates, which makes them more enthusiastic to provide it.


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