In Q1 FY27, India’s credit market saw portfolio value grow through large home and gold loans, even as overall origination volumes dipped. Lenders are using low-ticket consumer durable loans to acquire new customers, creating a two-speed growth strategy. Investors should note potential risks like rising delinquencies in smaller loan segments and the widening gap between deposit and credit growth.
The Indian retail credit market is undergoing a structural shift in the first quarter of fiscal year 2027, characterized by a distinct split between how lenders grow their portfolios and how they acquire new customers. While the overall value of credit portfolios is rising, it is increasingly driven by large, collateralized loans, whereas the volume of new customers is largely coming from small-ticket consumer loans.
The Shift to High-Value Portfolios
Banks and non-banking financial companies (NBFCs) are seeing significant portfolio expansion in high-ticket segments despite a slowdown in fresh loan applications. Home loan portfolios reached ₹45.5 lakh crore in Q1 FY27, marking a 10.5% growth from the previous year. Similarly, gold loans surged to ₹21.7 lakh crore, a 62.2% year-on-year increase. This growth is occurring even as origination volumes—the number of new loans being sanctioned—have declined by 17.3% for home loans and 25.6% for gold loans.
This trend suggests that lenders are prioritizing existing, high-value borrowers or larger loans, such as those exceeding ₹75 lakh, which now make up 41% of total home loan origination value. The rise in gold loan portfolios is also heavily supported by the increased value of gold as an asset, rather than just a surge in the number of new borrowers.
The Consumer Durable Entry Point
To keep the customer funnel active, lenders are relying heavily on consumer durable financing. This segment accounted for 45.5% of all new-to-credit borrower volumes in the quarter. With an average loan size of roughly ₹22,303, these loans serve as a digital gateway, allowing lenders to capture first-time borrowers. Interestingly, the reach of this lending is expanding beyond major metropolitan areas, with nearly 43.5% of origination value coming from regions outside the top 100 cities. Lenders use these small, frequent transactions to establish a credit history for customers, with the strategic intent of upselling them to larger, asset-backed products later.
Investor Monitorables and Risks
While this dual-speed approach helps lenders expand their balance sheets, it brings specific risks that investors should monitor. A primary concern is the narrowing gap between credit growth and deposit growth, which puts pressure on lenders to manage liquidity. As banks lend more than they collect in deposits, funding costs may rise.
Furthermore, asset quality is showing signs of stress in specific pockets. Data indicates that loans between ₹5 lakh and ₹35 lakh in the affordable housing segment, as well as consumer durable loans exceeding ₹50,000, are showing higher delinquency rates. These segments often represent more vulnerable borrowers. Additionally, private sector banks continue to face pressure on net interest margins, or the difference between the interest they earn on loans and pay on deposits, due to intense competition and shifting lending yields. Future updates on asset quality, deposit mobilization, and margin stability in upcoming quarterly results will be critical for assessing the long-term impact of these lending strategies.