July 8th 2025: The Reserve Bank of India (RBI), in its Financial Stability Report released on July 1, 2025, has raised concerns over a steep rise in defaults on unsecured retail loans, particularly among private sector banks.
According to the report, private banks contributed to nearly 79% of fresh slippages in unsecured personal loans between September 2024 and March 2025—far outpacing public sector banks (11%) and small finance banks (6%). These lenders also accounted for 52.6% of gross non-performing assets (GNPA) in the unsecured retail loan segment by the end of March 2025.
While the overall GNPA ratio for retail loans stood at 1.2%, the unsecured loan category showed higher stress levels with a GNPA ratio of 1.8%. The RBI also noted that private banks wrote off 81.9% of their unsecured NPAs, compared to just 10.9% by public sector banks—raising concerns that such write-offs could be concealing deeper financial risks.
The RBI attributed a slowdown in unsecured credit growth to its recent regulatory tightening, including higher risk weight norms. Growth in this segment declined to 11.6% during the September–March period, compared to over 27% in previous years.
The central bank urged financial institutions to maintain caution, especially in the unsecured lending and microfinance sectors, as pressures on asset quality persist.
