Urban youth shying away from loans, loan growth rate in January-March quarter dropped from 12% to 5%

Due to the economic slowdown, young people living in cities and metros are avoiding taking loans. As a result, the growth rate of retail loans dropped to 5 percent during the last quarter of the 2024-25 financial year, which is January to March. In the same period a year earlier, this growth was 12 percent.

A report released by TransUnion CIBIL on Monday states that demand for retail loans such as credit cards and consumer durables is rapidly declining. Most of these loans are taken by customers under 35 years old. The Reserve Bank implemented measures in late 2023 to curb the unchecked growth in the risky unsecured loan sector, aiming to control credit card and personal loan growth.

The report shows that credit card issuance has fallen by 32 percent compared to zero percent in the same period last year. Personal loans increased by only 6 percent, down from 13 percent last year. Consumer durable loans also decreased from 19 percent to just 6 percent. The decline in demand was even more pronounced among customers aged 35 or younger, causing new loan sources to drop by 3 percent to 16 percent.

Bhavesh Jain, Managing Director of TransUnion, said the slowdown in expanding consumer access to the financial system through new loans is concerning, especially since a large part of the population remains outside the formal credit system.

Home loan volume fell by 7 percent in the fourth quarter of FY 2025, compared to a 5 percent growth during the same period a year earlier. However, loans above Rs 1 crore grew by 9 percent. In vehicle loans, there’s been a preference for larger loans. The share of inquiries from rural areas increased to 22 percent, up from 20 percent a year ago. In semi-urban areas, it grew by one percent to 30 percent.