Retail-led credit growth faces headwinds: RBI's financial stability report

Lenders turned big time to the retail segment — individuals, households, and small businesses — to expand loan books as wholesale demand dried up due to sluggish investment and excess capacity.

But, the retail-led credit growth model in India is beginning to face headwinds due to two factors, according to the Financial Stability Report (FSR).

The first is an increase in delinquencies in the consumer finance portfolio. The second factor is a slowdown in the new credit segment, a key driver of consumer credit growth in the pre-pandemic period.

According to historical data, non-performing assets in emerging markets typically peak six to eight