The warning signs are beginning to flash again.After spending the last two years tightening underwriting standards, slowing unsecured lending and publicly acknowledging the risks of excessive consumer credit, parts of India’s lending industry appear to be slipping back into old habits.
The latest evidence is not just in the growth of personal loans but in the aggressive financing of consumer durables—from smartphones and televisions to air conditioners and furniture—often through “instant”, “zero-cost” or “buy now, pay later” offers.
The question is uncomfortable but necessary: are lenders once again confusing loan growth with credit quality?India has seen this movie before.Between 2021 and 2023, easy money flooded the retail lending market. Digital lenders promised approvals in minutes.
Fintech partnerships multiplied. Banks and NBFCs chased growth in unsecured credit. For a while, everyone celebrated financial inclusion and digital innovation.Then stress emerged.Delinquencies rose, regulators stepped in, and lenders suddenly rediscovered the importance of underwriting.
The Reserve Bank of India tightened norms on unsecured lending, forcing many institutions to slow disbursements and strengthen risk management.Yet barely has the dust settled before easy credit is making a comeback—this time through consumer durable financing.
Walk into any electronics showroom today and buying a ₹1 lakh television can be easier than opening a savings account. A smartphone costing more than a person’s monthly salary can often be financed with minimal documentation.
Instant EMI approvals have become a sales tool rather than a credit decision.The problem is not consumer finance itself. Responsible retail credit supports economic growth and expands access to quality products.
The problem begins when the loan becomes easier than assessing the borrower’s ability to repay.Retail sales targets can easily overpower credit discipline. Manufacturers want higher sales. Retailers want conversions. Fintech platforms want transaction volumes. Lenders want loan growth. Everyone benefits upfront.
Only one party bears the long-term consequences—the borrower.History shows that consumer credit cycles rarely end because demand disappears. They end because repayment capacity gets overstretched.
The danger is particularly acute in an economy where income growth remains uneven. A salaried employee with stable cash flows may comfortably service an EMI. But extending similar credit to borrowers with volatile incomes, limited savings or multiple existing loans simply increases the probability of future defaults.
The industry must resist the temptation to believe that technology alone can eliminate credit risk. Artificial intelligence can speed up approvals. It cannot create repayment capacity.Nor should lenders assume that financing consumer durables is inherently safer simply because there is a physical product involved.
A depreciating television or smartphone offers little recovery value once a borrower defaults.For regulators, the message is equally important. Credit growth should be celebrated only when accompanied by sound underwriting.
Rapid expansion in unsecured consumer finance deserves close monitoring before it becomes a systemic concern rather than after.India undoubtedly needs deeper consumer credit markets. But it needs smarter lending more than faster lending.Easy loans may boost quarterly loan books and retail sales.
Reckless loans eventually boost non-performing assets.The industry has already paid once for forgetting that distinction. It should not have to learn the lesson again.
“Biznewsweek is free for everyone. If you value independent, evidence-based business commentary, please consider supporting our work.”