Retail Loans in India Grow 18 Percent as Personal Loans and Gold Loans Surge
India’s banking sector has reported strong growth in retail
loans in India, with total outstanding retail credit rising by 18.1 percent
to Rs 162 lakh crore in the December quarter. This sharp increase reflects
growing consumer demand, improving income levels, and rising financial
confidence among the middle class.
Recent data compiled by credit bureau CRIF High Mark and
reported widely in leading financial newspapers shows that personal loans,
gold loans, and home loans have been the key drivers of this
growth. The numbers indicate that retail borrowing is expanding faster than
many expected, even as discussions continue around corporate credit growth and
long-term investment trends.
In this detailed analysis, we examine the reasons behind the
surge in retail loan growth, the performance of major loan segments,
improvement in credit quality, and what this trend means for borrowers and the
Indian economy in 2025.
Strong Expansion in Retail Lending
The total value of retail loans outstanding reached
Rs 162 lakh crore in the third quarter ending December, marking an 18.1 percent
year-on-year increase. Retail loans include housing loans, personal loans, gold
loans, vehicle loans, consumer durable loans, and loans to small professionals
and sole proprietors.
This growth reflects increasing reliance on formal credit
channels. Over the past decade, financial inclusion has improved significantly
due to digital banking, Aadhaar-based verification, and easier credit
assessment methods. As a result, more households are accessing structured loan
products instead of informal borrowing.
The strong retail loan expansion also signals that
consumption demand remains stable despite global economic uncertainties.
Home Loans Remain the Largest Segment
Among all categories, home loans in India continue to
account for the largest share of retail lending. During the December quarter,
home loans grew by 10.5 percent to Rs 43 lakh crore.
Housing demand remains strong due to rapid urbanisation,
infrastructure expansion, and continued migration towards metropolitan and
tier-two cities. The data also shows that the number of active home loan
accounts increased by 3.3 lakh during the quarter, indicating rising
participation from new borrowers.
Another important trend is the increase in average loan
size. This suggests higher property values in key cities and greater
willingness among buyers to invest in larger homes.
State-Wise Housing Trends
Growth in housing loans in India varies across
states. Delhi recorded the lowest growth at 7.7 percent, while Telangana,
Karnataka, Uttar Pradesh, and Rajasthan reported higher than average growth of
around 10.5 percent.
Southern states such as Telangana and Karnataka continue to
benefit from technology sector expansion and employment growth. Uttar Pradesh
and Rajasthan have witnessed infrastructure development and increasing urban
housing projects, driving loan demand.
Gold Loans See Exceptional Surge
The most striking trend in the December quarter was the
surge in gold loans in India, which grew by 44.1 percent year-on-year.
The total outstanding amount in this segment reached Rs 16.2 lakh crore.
Several factors have contributed to this sharp growth.
Rising gold prices have increased the value of collateral, allowing borrowers
to secure larger loan amounts. Gold loans are also processed quickly with
minimal documentation, making them popular for urgent financial needs.
Banks and non-banking finance companies have expanded their
gold loan portfolios aggressively because these loans are secured and
relatively lower risk compared to unsecured lending. In rural and semi-urban
areas, gold remains a trusted financial asset, and leveraging it for short-term
liquidity has become common.
The rise in gold collateral loans also reflects
increased working capital needs among small traders and self-employed
individuals.
Personal Loans Maintain Steady Growth
The personal loan segment recorded a quarterly growth
of 11.6 percent, reaching Rs 15.9 lakh crore in outstanding loans.
Personal loans are unsecured and typically used for
weddings, travel, medical expenses, education, or debt consolidation. The
steady growth indicates that consumers are confident about repayment capacity
and are comfortable using formal credit for lifestyle and emergency needs.
Digital lending platforms have played a key role in this
expansion. Instant approval systems, credit score-based underwriting, and
app-based loan applications have simplified access to personal credit.
However, financial regulators continue to monitor unsecured
loan growth carefully to ensure that household debt levels remain sustainable.
Auto, Two-Wheeler, and Consumer Durable Loans Rise
The reduction in the Goods and Services Tax on certain
products has positively impacted consumption-driven credit segments. According
to CRIF High Mark data:
- Auto
loans in India grew by 14.6 percent year-on-year.
- Two-wheeler
loans increased by 12.3 percent.
- Consumer
durable loans rose by 14.3 percent.
Lower taxation has reduced the effective purchase cost,
encouraging consumers to finance vehicles and electronic goods. Festive season
demand and easier financing options also contributed to the growth.
This trend highlights a revival in consumer spending, which
is critical for sustaining economic momentum.
Loans to Professionals and Sole Proprietors
Loans to sole proprietors and professionals grew
significantly by 26.2 percent during the December quarter.
This segment includes doctors, consultants, chartered
accountants, small traders, and independent business owners. The strong growth
suggests that small businesses are expanding operations and investing in
working capital or equipment.
The expansion of small business loans in India is
important because micro and small enterprises form the backbone of employment
and local economic activity.
Improvement in Credit Quality
One of the most encouraging developments is the improvement
in credit quality in retail loans. The percentage of loans overdue
between 30 and 180 days declined to 2.8 percent, compared to 3.2 percent in the
previous year.
This reduction indicates better repayment behaviour and
improved credit discipline among borrowers. It also reflects prudent lending
standards adopted by banks and financial institutions.
Lower delinquency rates strengthen the banking system and
reduce financial stability risks.
Why Retail Loan Growth Is Increasing
Several structural and economic factors are driving retail
credit growth in India.
First, rising disposable income and stable employment in
urban centres have boosted borrowing capacity. Second, digital banking has
reduced processing time and simplified documentation. Third, strong competition
among banks has resulted in competitive interest rates.
Additionally, financial awareness has improved, and more
consumers understand how to use credit strategically for asset creation and
personal needs.
Government policies supporting housing and infrastructure
development have also indirectly stimulated housing loan demand.
Corporate Loan Growth Still Under Watch
While retail credit is expanding rapidly, corporate loan
growth remains a key focus area. Corporate lending is essential for capital
investment, infrastructure expansion, and large-scale employment generation.
Although corporate loans have returned to double-digit
growth in recent quarters, experts believe sustained investment momentum is
necessary for long-term economic strength.
Balanced growth between retail loans and corporate loans
in India ensures a stable and diversified credit ecosystem.
Economic Implications of Retail Loan Boom
The surge in retail loans indicates healthy consumer demand
and financial inclusion. Increased borrowing for homes, vehicles, and consumer
goods supports manufacturing, construction, and services sectors.
However, excessive borrowing without adequate income growth
can create future stress. Responsible lending and borrowing remain essential.
In 2025, the retail credit trend is expected to remain
strong, especially if interest rates remain stable and economic growth
continues.
For borrowers, this environment offers easier access to
funds. For banks, it provides opportunities to expand market share while
maintaining risk controls.
What Borrowers Should Keep in Mind
Before applying for personal loans, gold loans, or home
loans, borrowers should carefully evaluate interest rates, processing fees,
tenure options, and total repayment obligations.
Maintaining a good credit score is essential for securing
favourable loan terms. Borrowers should avoid overleveraging and ensure that
monthly instalments remain within affordable limits.
Financial discipline today prevents stress tomorrow.
Outlook for 2025
Given current trends, retail lending growth in India
is likely to continue in 2025. Strong housing demand, stable gold prices,
digital lending expansion, and rising middle-class aspirations will support
sustained momentum.
Regulatory vigilance and credit quality monitoring will
remain critical to maintaining financial stability.
If managed prudently, the retail loan boom can contribute
significantly to consumption-driven economic growth while supporting small
businesses and household asset creation.
Read also : Increase EMI or Prepayment: Which Is Better to Pay Off Your Home Loan?
Frequently Asked Questions
1. Why did retail loans grow by 18 percent in December?
Retail loans grew due to strong demand for home loans,
personal loans, and gold loans, supported by rising incomes and easier digital
access to credit.
2. Which loan segment grew the fastest?
Gold loans recorded the highest growth at 44.1 percent
during the December quarter.
3. How much did total retail loans reach?
Total retail loans reached Rs 162 lakh crore in the December
quarter.
4. Are gold loans safer than personal loans?
Gold loans are secured by collateral, which generally makes
them less risky for lenders compared to unsecured personal loans.
5. What does lower overdue percentage indicate?
A decline in overdue loans from 3.2 percent to 2.8 percent
shows improvement in credit quality and better repayment behaviour.
6. Is retail loan growth good for the economy?
Yes, healthy retail loan growth supports consumption and small business activity. However, balanced growth with corporate lending is essential for long-term economic stability.
