India’s unsecured credit landscape is going through a structural transformation, which is driven by stronger borrowers’ discipline, broader credit penetration, and renewed lenders’ confidence. According to Experian’s latest report, ‘Credit Insights: Unsecured Loans (September 2025),’ the country is seeing sustained momentum across personal loans, credit cards, and loans for cars and consumer durables. The report notes that “fresh sourcing of loans in Q2-FY26 remained strong,” due to larger ticket sizes, expanding participation from non-banking finance companies (NBFCs), and better repayments. This marks a maturing credit environment nationally, which is shaped by the rise of digital lending platforms.
The study underscores a shift in consumer behaviour, and lender strategy as credit flows go beyond the metros to smaller cities, and semi-urban markets. Manish Jain, Country Managing Director of Experian India, says, “Demand continues to rise, consumers are moving towards higher ticket sizes, and repayment behaviour is steadily improving. The improvement in early delinquencies… shows that both consumers and lenders are making more responsible, informed choices, indicating positive trends.” He adds that the analytics-driven approach enables lenders to expand responsibly.
Personal loans continue to anchor the unsecured credit segment. Assets under management reached nearly Rs 16 lakh crore, or a 13 per cent year-on-year increase. Major lender categories such as private banks, public sector banks, and NBFCs reported higher fresh sourcing. NBFCs strengthened their grip in the sub-Rs1 lakh ticket-size category, which indicated their expanding reach in the smaller markets. A notable shift is the rise in average ticket sizes, which hints at higher consumer confidence. Early-stage delinquencies improved, signalling healthier repayment trends.
In November 2025, CRIF High Mark, a part of the global network, published its quarterly edition of the report, ‘How India Lends.’ It too showed that the personal loan portfolio grew 12 per cent year-on-year, and 2.9 per cent quarter-on-quarter. It was supported by a sharp rebound in fresh originations, which surged to nearly Rs3 lakh crore, a 32 per cent quarter-on-quarter rise. Loans above Rs10 lakh account for 37.4 per cent of total value. This segment was dominated by the PSU banks, even as the NBFCs captured the small-ticket segment, accounting for nearly 90 per cent of the overall volumes.
The credit card segment recorded Rs3.4 lakh crore in assets under management, up nine per cent year-on-year. Fresh sanctioned limits rose 13 per cent quarter-on-quarter, after three quarters of decline, which subdued the annual growth. The market remains concentrated, and the top four issuers raised their collective share from 70 per cent to 72 per cent. Average credit limits increased, and the portfolio health strengthened, which was backed by an improvement in delinquency from two per cent to 1.8 per cent.
Two-wheeler financing registered robust growth, with the assets under management touching Rs1.8 lakh crore, or 18 per cent year-on-year rise. New loan sanctions grew nine per cent year-on-year in Q2-FY26. The NBFC dominance continued, aided by higher sourcing from the first-time borrowers. Higher-ticket loans in the Rs 1-2 lakh bracket gained traction, reflecting a shift towards premium vehicle purchases. The delinquency rate reduced from 6.2 per cent to 5.4 per cent, although the longer-duration stress remained elevated.
Consumer durable loans posted the fastest growth among the unsecured products, with the assets under management rising 16 per cent year-on-year to Rs1 lakh crore. New sourcing expanded 22 per cent year-on-year, supported by aggressive NBFC participation, and strong retail penetration. Loans under Rs20,000 accounted for nearly 65 per cent of the volumes, which aligned with the country’s expanding small-ticket digital EMI ecosystem.
As India’s credit ecosystem evolves with stronger underwriting, digital enablement, and rising consumer confidence, unsecured lending appears well-positioned for sustained, responsible expansion. The Reserve Bank of India recently cut the repo rate by 25 basis points to 5.25 per cent, which will offer relief to several sections of the borrowers, especially those considering personal loans. As the overall cost of borrowing drops, banks and NBFCs are expected to gradually reduce the interest rates on personal loans. The impact may not be visible immediately, but may see marginally lower rates in the coming weeks. The lenders will slowly realign pricing to reflect the revised repo rate. This bodes well for the unsecured lending segment.
Recently, at a press briefing, the central bank’s deputy governor, Swaminathan J, said that it remains confident about the sustainability of the credit growth, supported by stable asset quality, and a measured rise in unsecured lending, which so far shows no signs of stress. He noted that apart from monitoring year-on-year credit expansion, the regulator evaluates how each loan segment is growing relative to the others, along with slippage trends across the portfolios. The earlier regulatory measures on unsecured credit, he explained, were introduced when such loans were expanding at nearly twice the pace of the rest of the loan book.
At present, the overall credit growth stands at about 10-11 per cent. Lending to the large industries is growing at 10 per cent, home loans are expanding at 11 per cent, and personal loans are rising at 14 per cent. “The growth has been seen more in secured segments like gold loans or home loans, and unsecured loans have significantly moderated. So, there are no indicators at this point in time which are creating a concern for us,” Swaminathan said. Unsecured lending at this stage forms less than 25 per cent of the retail book, and accounts for only 7-8 per cent of the total banking system credit.
However, experts contend that there are several pitfalls in unsecured credit. Although the current delinquency rates indicate borrowers’ discipline, and ability to pay the loans, the situation can quickly go out of control. In the past, the robust trends in unsecured loans led to over-borrowing, largely driven by over-spending, and an inability among the borrowers to pay the EMIs, or settle the credit card bills. This is especially relevant as the central bank warns borrowers of cybercrime, and online loan frauds. In the recent past, aggressive loan pitches by Chinese apps created havoc in the credit system.
Debt traps, when overextended loan payments constitute 30-40 per cent of monthly incomes, can lead to spiralling debt, impact savings especially for emergencies and crucial expenses, and lead to bankruptcy-like situations. Hence, individuals need to be careful, and calculate their loan payment outgoes, before opting for fresh loans. Never forget that unsecured credit is more expensive.
