Loans Against Jewellery And Other Secured Loans Grow Despite Slowdown In Retail Lending: Report

The year 2024 has been a significant one for India’s banking sector.  In 2024, retail lending grew by 16 per cent year-on-year (YoY) to Rs 52,78,665 crore compared to Rs 45,57,766 crore in 2023, according to fintech company Bankbazaar’s Moneymood report. However, the rate of growth in retail lending has moderated compared to 18 per cent YoY in 2023.

Even as the pace of growth in retail lending has moderated, secured loans such as loans against jewellery have managed to buck the trend growing significantly in 2024. Housing loans and loans against securities also witnessed an increase in the pace of growth in 2024.

Loans against jewellery grew by 56 per cent to Rs 1,54,282 crore in 2024 compared to Rs 98,747 crore in 2023. In 2023, loans against jewellery grew by 13 per cent YoY compared to Rs 87,276 crore in 2022. Loans against jewellery witnessed the fastest growth across all categories.

Housing loans also grew by 18 per cent to Rs 25,25,138 crore in 2024 compared to Rs 21,44,011 crore in 2023. Housing loans grew by 14 per cent between 2023 and 2022. In 2024, loans against securities grew by 16 per cent YoY to Rs 9,060 crore compared to Rs 7,812 crore in 2023. In the previous year loans against securities had witnessed a year-on-year decline of 6 per cent.

The report showed that the rate of growth for unsecured loans such as personal loans, vehicle loans and education loans moderated in 2024 compared to the previous year. The report claimed that the moderation was on account of measures introduced by the Reserve Bank of India to regulate unsecured credit.

Bankbazaar projects that home finance should remain robust especially if interest rates start to drop. A reduction in interest rates is likely to improve the affordability of housing which in turn can drive demand for mid-range and premium homes. However, Bankbazaar said that property prices might increase as demand surges, particularly in urban centres. Additionally, urbanisation and government-backed affordable housing schemes are likely to keep rural and Tier-2 market demand healthy in 2025.

The fintech company also said that the high growth in gold loans shows an increasing number of people moving away from informal to formal credit. Bankbazaar also cited a KPMG report which claimed that 65 per cent of the gold loan market was unregulated. However, banks and NBFCs have increased their market share. The report also mentioned that a significant transfer from unsecured personal loans to gold loans has also taken place.