Home Loan Originations Drop 9% in June Quarter

Home loan originations dropped 9% in Q2 2024, despite stable values and a decline in non-payment incidents. This slowdown in growth came as financial institutions tightened credit supply. The report by Transunion Cibil highlights declines in unsecured lending and reluctance to lend to new customers.

Home loan originations dropped 9 per cent in the June quarter, according to a report released on Monday.

From a value perspective, the quantum of home loan originations was similar to the year-ago period, the report by credit information company Transunion Cibil said.

The outstanding balances on home loans grew only 14 per cent during the quarter, marking it as the slowest growth across all retail lending categories, the report added.

Interestingly, the decline in origination volumes and the sluggish growth in outstanding balances came at a time when non-payment incidents reduced, with overdue advances over 90 days standing at 0.9 per cent in June 2024, representing a 0.32 per cent improvement, the report noted.

''India's retail credit growth moderated in the quarter ending June 2024 due to financial institutions tightening the supply of credit, particularly on consumption-led products like credit cards, consumer durable loans and personal loans,'' the report explained.

The unsecured lending category, comprising credit cards and personal loans, experienced declines across various areas.

The volume growth in originations dipped 30 per cent in credit cards compared to an 8 per cent increase in the year-ago period, while for personal loans, volumes were up 3 per cent and originations by value remained consistent.

It is noted that the Reserve Bank of India (RBI) is cautious about the growth of unsecured lending and introduced measures to temper it, like increasing risk weights. The RBI has claimed these actions have achieved the intended impact.

The report also noted lenders' increased reluctance to lend to new-to-credit customers, with the share of loan originations for such customers dropping 4 percentage points to a record low of 12 per cent during the June quarter.

Private banks showed the slowest growth in outstanding retail loan balances at 18 per cent, compared to 22 per cent for state-run lenders and 35 per cent for non-banking financial companies.

The improvement in delinquencies was also lowest among private banks, the report highlighted.

(With inputs from agencies.)