Car loans race past housing loans in Q1, marking an unfamiliar turn for Indian banking
loans
have outstripped home loans in the first quarter of FY26. This development marks a notable change in consumer preferences and lending behaviours, as traditional home financing has taken a backseat, The Times of India reported on August 1.
According to recent data from the Reserve Bank of India (
RBI
), Indian banks added Rs 2.4 lakh crore to their loan portfolios between April and June. Of this total, a significant portion, nearly two-thirds, was attributed to home loans, vehicle loans, and loans against gold jewellery. Despite its historical dominance in retail lending, housing finance has experienced a slowdown.
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This is partly due to
HDFC Bank
's cautious approach to growing its mortgage portfolio, which has lagged behind the industry due to heightened competition, data shows.
The evolving landscape of consumer lending in India is a clear indication of changing priorities among borrowers, and as banks adjust to these trends, further developments are anticipated in the coming quarters, experts say.
As of June, the outstanding amount of home loans stood at Rs 30.6 lakh crore, accounting for 16.6% of all bank credit. Although this figure reflects a year-on-year growth of 9.6%, the quarter-on-quarter increase was a mere 1.9%, or Rs 56,643 crore.
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In contrast, auto loans saw a more robust performance, with an increase of Rs 29,492 crore, bringing the total to Rs 6.52 lakh crore.
This represents a quarterly growth of 4.7% and a year-on-year increase of 10.8%, elevating the segment's share of bank credit to 3.5%.
Overall, the growth of bank credit during this period was modest, rising just 1.3%, from Rs 182.44 lakh crore to Rs 184.83 lakh crore. A notable contraction in the services sector, where loans decreased by 0.6% or Rs 30,631 crore, was a key factor in this sluggish growth.
The decline in lending to non-banking financial companies (NBFCs), which fell to Rs 15.96 lakh crore, contributed to this trend.
Interestingly, gold-backed loans experienced the most significant increase, surging by 28.9% to reach Rs 2.77 lakh crore. This spike is largely attributed to the reclassification of agricultural loans secured against gold into the gold loan category.
However, projections indicate that these lending trends could shift in the second quarter, as the RBI is expected to revise its lending norms.
In the agricultural sector, lending expanded by 6.8% year-on-year, a decrease from the 17.4% growth noted in the same period last year. Industrial credit also saw a slowdown, growing by 5.5% compared to 7.7% a year earlier.
Nonetheless, there was some positive momentum in sectors such as engineering, construction, and textiles.
Personal loans, encompassing unsecured lending and credit card dues, continued to grow but at a decelerated pace. The growth rate for this segment fell to 14.7% from 16.6% in the previous year, reflecting a moderation in both vehicle loans and credit card outstanding balances.
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