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Informist, Wednesday, Jul 31, 2024

 

--S&P: India retail loans may rise 3-fold by 2030 on digital steps 

--S&P: India household debt may rise to $2.5 trln by 2030, 34% of GDP 

--S&P: Micro loan increase may be faster than India retail loan growth 

--S&P: Greater credit penetration comes with risk of more loan defaults 

 

NEW DELHI – India's household debt may rise to around $2.5 trln, or nearly 34% of GDP, by 2030 on the back of a threefold jump in retail lending in the country, S&P Global Ratings said today. Currently, India's household debt is 23.8% of GDP, the rating agency said.

 

Retail lending itself will be driven by digital initiatives, which have already boosted India's financial inclusivity, the rating agency said. The technology boom in retail lending in India has also increased the basic savings account ownership to about 77% from 35% in 2011, it said.

Micro loans, mainly to previously-excluded low income earners, may even be faster than the growth in retail credit, S&P said, adding that micro loans may make up for about 7% of household debt by 2030 from 5.5% as of March this year.

 

"Greater credit penetration comes with the risk of higher loan defaults, notably among low-income earners during an economic downturn," said Geeta Chugh, analyst at S&P Global Rating. "Yet, that risk will be mitigated by limited micro-lending by major banks." 

 

Penetration of credit remains underwhelming in India even as digitalisation has driven financial inclusion, with mass access to savings accounts and digital payments, S$P said. "Just 12% of Indians over the age of 15 had borrowed from a formal financial institution prior to 2021--less than half the global average of 28%," it said. 

 

"Borrowing from formal financial institutions among lower earners is even less frequent, meaning many households have little access to capital for investment that might help them escape poverty and, in turn, support India's long-term economic growth."

 

India's digital payment infrastructure is helping lenders collect payments and reduce barriers to lending-market competition. This, S&P said, could strengthen India's economy and provide growth opportunities for the financial sector.  End

 

Reported by Shubham Rana

Edited by Avishek Dutta

 

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