The devil in retail: Consumer financing may attract closer scrutiny by RBI

The consumer financing business is showing signs of heightened stress

The Reserve Bank of India’s (RBI’s) Financial Stability Report (FSR: December 2021) says the retail credit growth model is confronting headwinds: delinquencies have risen, and the new-to-credit segment is showing a dip in originations. It refers to the Bank for International Settlements’ (BIS) observation that in emerging markets, bad loans “typically peak six to eight quarters after the onset of a severe recession.”

Fintech firms — which claim to be smart with technology — are on a podium on which they would not like to be seen. The FSR shows their delinquency levels shot up by 274 basis points (bps)