India’s consumer credit boom may be showing its first signs of strain, with repayment stress surfacing even in secured loans such as mortgages. According to Saurabh Mukherjea, founder of Marcellus Investment Managers, “first check bounces are at 10-year high,” particularly in technology hubs such as Bangalore and Hyderabad, a revelation that came up during his interactions with banks' direct selling agents.
Mukherjea has attributed the problem to pandemic-era borrowing patterns among double-income tech households. “During COVID, a lot of families bought larger flats because both partners were working from home. Now that the job situation has turned adverse in tech, those families are finding it hard to keep up with both personal loan repayments and mortgage finance repayments,” he said on The Wealth Formula podcast with N Mahalakshmi.
The stress is not confined to housing alone. Even microfinance institutions (MFIs) are under pressure as states make loan collections harder by imposing regulations that borrowers often interpret as restrictions. “Try being an MFI lender who has to go and explain in a village in Karnataka or Bihar that what I’m doing is legitimate,” Mukherjea said, adding that the domino effect of states copying each other has created persistent challenges for the sector.
Credit cards and commercial vehicle financing too are showing deterioration. Quarterly results of lenders such as SBI Cards have highlighted rising stress, while logistics-linked CV loans are suffering from a subdued economic activity. “Interestingly, even in mortgage finance, the first signs of stress are already showing up,” Mukherjea said, citing feedback from direct sales agents.
The Reserve Bank of India’s latest Financial Stability Report has echoed this concern, Mukherjea said adding that according to his analysis, “one in 10 middle-class households will not be able to repay their loan” given that the weighted average interest rate now outpaces wage growth, an unprecedented trend.
While large banks like HDFC Bank, ICICI Bank and State Bank of India appear to be holding their own, smaller lenders may be more vulnerable. “Bad news is coming through thick and fast on asset quality,” Mukherjea said, pointing to distress across MFIs, unsecured lending and even core middle-class credit.
The convergence of slowing job markets - particularly in technology and financial services - and rising household leverage means stress in retail credit is likely to remain a dominant theme for lenders in the coming quarters.
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