While bad loans in India's banking sector are at a decade-low, estimated at 3.6% of assets by March 2024 by the central bank, Reserve Bank of India Governor Shaktikanta Das said this month the central bank was monitoring some categories of personal loans, without elaborating.
What's worrying the regulator is a surge in tiny personal loans, particularly loans of up to 10,000 rupees ($120) taken for three to four months, often for "lifestyle" spending, according to a person familiar with the central bank's thinking.
Four people discussed the central bank's concerns with Reuters but declined to be identified as they are not authorised to speak to the media.
Ismail Sayyed, a 30-year old cab driver from Mumbai, took his first personal loan of 5,000 rupees this year.
Central bank officials "have been ringing the bell", said an official at a large bank that has seen sharp growth in personal loans.
Persons:
Francis Mascarenhas, Shaktikanta Das, CRIF, Ismail Sayyed, Kadam, Rajeev Jain, Ira Dugal, Sonali Paul
Organizations:
Reserve Bank of India, REUTERS, Reuters, Bajaj Finance, UBS, Thomson
Locations:
Mumbai, India