Rising Tide of Personal Loan Defaults: A Warning Sign for India’s Financial Stability

The delinquencies in personal loans are creeping up, with increases in defaults lately reported among the borrowing population. According to TransUnion's 2025 Consumer Credit Forecast, serious unsecured personal loan delinquency rates (60+ days past due) are expected to increase slightly over the next year, reaching 4% by the end of 2025. This trend comes after a period of rapid growth in personal loan disbursements, especially from fintech companies, which accounted for 76% of all personal loans issued in the first half of FY25.

This is further supported by recent reports from banks such as ICICI Bank and Yes Bank, which revealed that a considerable portion of new retail slippages is originating from unsecured loans, highlighting the struggles of people with multiple personal loans. Reserve Bank of India's recent regulatory changes aimed at tightening lending practices have intensified scrutiny on unsecured loans, pushing lenders to reconsider their risk appetite.

As delinquencies continue to rise, both lenders and borrowers need to tread carefully through that challenging landscape. If this trend continues, there might be serious implications for the economy at large.

Source: TransUnion, Financial Express, GlobeNewsWire,  Business Standard, rbi.org