Difficult to Get Unsecured Personal Loans From HDFC and ICICI Banks? Read To Know More

India’s retail lending market is witnessing a notable shift as major private lenders, including HDFC Bank and ICICI Bank, appear to be recalibrating their exposure to unsecured personal loans and credit cards. 

After two years of rapid expansion in retail credit, the banking sector is entering a phase of strategic moderation, balancing growth ambitions with the Reserve Bank of India’s (RBI) renewed focus on credit discipline and asset quality.

Rising Borrowing Costs and RBI’s Prudence Push

The slowdown follows the RBI’s decision in late 2023 to increase risk weights on unsecured loans by 25 percentage points, a move that effectively raised the cost of lending for banks. These regulatory changes were aimed at curbing excessive retail credit growth, particularly in segments like personal loans, consumer durable financing, and credit cards — all of which had been growing at nearly 20–25% annually.

Banks are now prioritising secured segments such as home loans and vehicle loans, where default risks are comparatively lower. The focus has also shifted toward maintaining stable funding bases, as deposit mobilisation has not kept pace with credit expansion.

Retail Loan Growth Trends Across Banks

The data below highlights the recent trends in retail loan growth among major private banks. It reflects a noticeable deceleration in unsecured lending compared with the aggressive pace seen in FY23.
 

This data suggests a broad industry trend toward caution. The sharper decline in unsecured credit reflects banks’ preference for quality over quantity, particularly as global interest rate cycles remain uncertain and liquidity conditions tighten.

Read More - HDFC Bank Q2 Highlights: Deposits Jump 12%, Gross Advances Up Nearly 10% 

Deposit Accretion and Funding Imbalance

The moderation in retail credit also stems from a widening gap between deposit growth and loan demand. While credit expanded at roughly 14% year-on-year, deposit accretion remained at around 10%, leading to concerns about sustainable funding. Banks are thus increasing their focus on high-quality deposits through premium savings accounts and term deposits, even if it means a temporary slowdown in lending.
 

This growing imbalance underscores why leading banks are recalibrating their credit strategies. By tempering loan growth, they aim to ensure adequate liquidity buffers and prevent over-leveraging in an uncertain macroeconomic climate.

Learn More - No Repo Rate Cuts In October; Is This Prediction By The HDFC Right Or Not? 

Focus on Credit Quality and Digital Efficiency

To maintain profitability amid slower credit expansion, banks are leveraging technology to improve underwriting efficiency and customer retention. HDFC Bank and ICICI Bank, for instance, are deploying advanced analytics and alternative data sources to enhance credit scoring accuracy. Additionally, digital pre-approved loan products and embedded finance models are helping optimise operational costs even as volumes slow.

Conclusion

India’s retail lending boom is entering a more sustainable phase. While the moderation by large private lenders may appear cautious, it reflects prudent risk management amid changing regulatory and liquidity conditions. Over the medium term, this recalibration is expected to strengthen asset quality and protect the financial system from overheating. For borrowers, however, it may mean tighter credit access and a renewed emphasis on secured borrowing over discretionary consumption loans.
 

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