Context:
With the Reserve Bank of India (RBI) tightening norms on unsecured credit in late 2023, both banks and non-banking financial companies (NBFCs) have become cautious in extending personal loans and credit card debt. As a result, borrowers are now increasingly opting for secured alternatives such as:
- Loans against Fixed Deposits (FDs)
- Loans against Shares and Bonds
- Gold Loans (Jewellery as Collateral)
Key RBI Measures
- November 2023: RBI increased risk weights on unsecured personal loans and credit card dues.
- Also raised risk weights on NBFCs’ unsecured loan exposure (later rolled back in February 2025).
Data Trends: Shift to Secured Credit
- Loan against FDs: Growth rose from 6.7% (Dec 2023) to 11.9% (Feb 2025)
- Loan against Shares/Bonds: Jumped from 8.5% to 16.7%
- Gold Loans: Growth spiked from 18.6% to 87.4%
- In contrast:
- Credit card dues growth slowed from 32.6% to 11.2%
- Unsecured loans growth fell from 22.9% to 7.9%
Why Borrowers Are Switching
- High demand for credit persists.
- Collateral-backed loans are:
- Less risky for lenders
- More accessible for borrowers with available assets
- Gold price surge has made gold loans more lucrative—less gold needed for the same loan value
- Retail customers are now adopting products like loans against shares, earlier restricted to HNIs.
With the regulatory environment tightening around unsecured consumer credit, a paradigm shift towards collateral-backed loans is underway. This reflects not only a more cautious lending approach by financial institutions but also a changing borrower mindset focused on accessibility, affordability, and credit health.
