Reserve Bank of India data point to a clear change in household borrowing patterns: Indian consumers are leaning more heavily on secured loans, especially loans against gold jewellery, while unsecured retail categories such as credit card dues and consumer durable loans are expanding at a far slower pace. The shift comes at a time when overall bank credit has continued to rise strongly, underscoring that demand for borrowing remains healthy even as the mix of lending changes.
Gold-backed borrowing rises
Loans against gold jewellery recorded a sharp increase in percentage terms, reflecting a notable surge in demand for collateralised credit. The rise is partly explained by a favourable base effect, but the scale of the increase also suggests that households are using gold holdings more actively to meet short-term funding needs. In India, gold remains one of the most liquid household assets, and its use as collateral often accelerates when borrowers seek quick access to funds without taking on the higher pricing and stricter underwriting associated with unsecured loans.
The latest trend is significant because gold loans are typically faster to disburse and easier to secure than many other forms of retail credit. For borrowers, they can provide a practical bridge during periods of cash-flow stress, seasonal spending, or business needs. For lenders, they offer the comfort of tangible security, which can reduce credit risk and support lending growth even in a more cautious environment.
Unsecured retail credit cools
By contrast, credit card dues and consumer durable loans have shown only minimal growth. That points to a moderation in discretionary spending financed through revolving credit and point-of-sale lending. Credit card dues are often seen as a proxy for consumer confidence and short-term consumption appetite, while consumer durable loans are closely linked to purchases of appliances and other household goods. Slower growth in both categories suggests that households may be becoming more selective about taking on unsecured obligations, or that lenders are tightening underwriting standards in response to risk considerations.
The slowdown does not necessarily imply a broad weakening in consumption, but it does indicate a more cautious borrowing posture. Households appear to be preferring loans backed by assets over credit that depends largely on income assessment and repayment discipline. That behavioural shift is important for banks and non-bank lenders alike, because it can alter portfolio composition, pricing, and risk management strategies.
Personal loans still drive credit
Personal loans continue to grow and remain a substantial contributor to overall bank credit. Even as some retail segments lose momentum, personal lending has retained its central role in credit expansion, reflecting sustained demand for funds across a wide range of household needs. These loans often finance medical expenses, education, travel, home improvements, and other consumption requirements that do not fit neatly into secured lending categories.
The broader picture is one of resilient credit growth with changing preferences. Bank credit rose markedly, indicating that lending activity remains robust across the system. But the composition of that growth matters. A stronger tilt toward secured lending can signal greater caution among borrowers, more conservative risk management by lenders, or both. It can also reflect the macroeconomic environment, where households seek flexibility and speed while avoiding the higher cost of unsecured debt.
For the banking sector, the trend has several implications. Secured lending against gold can support loan book expansion with lower credit losses, but it may also be more sensitive to gold price movements and operational execution. Meanwhile, slower growth in credit card dues and consumer durable loans could temper margins in some retail portfolios if high-yield unsecured lending loses momentum. Lenders may need to balance growth with asset quality as household borrowing preferences evolve.
The RBI data therefore capture more than a simple rise in one loan category. They suggest a broader reordering of household finance in India, where collateral-backed borrowing is gaining prominence at the expense of some forms of unsecured retail credit. If sustained, that shift could reshape how banks, fintech lenders, and non-bank finance companies compete for retail customers in the months ahead.