South India sees sharp surge in personal loan consumption, North and East lags

South India is leading in terms of personal loan growth, while Mumbai -- home to a large number of corporate headquarters -- leads in deposits
The South accounted for nearly 35% of the total Rs 40 lakh crore worth of loans issued in FY23 (Photo | RDNE/Pexels)
The South accounted for nearly 35% of the total Rs 40 lakh crore worth of loans issued in FY23 (Photo | RDNE/Pexels)

Customers in India’s southern states are the largest beneficiaries of personal loans, while those in the western region are the biggest savers, according to RBI data.

As per the Handbook Statistics of Indian States 2022-23 released earlier this week, the southern region saw the highest personal loan consumption of Rs 14 lakh crore, while the western region registered the highest amount of deposits at Rs 50 lakh crore. The top five states with the highest personal loan consumption include Maharashtra, Karnataka, Tamil Nadu, Telangana and Madhya Pradesh, whereas Maharashtra, Delhi, Uttar Pradesh, Karnataka and Tamil Nadu are the top five states with large deposits.

Coming to personal loans, the total amount of loan disbursals during FY23 by all scheduled commercial banks stood at Rs 40 lakh crore, in which the southern region is the undisputed leader with a share of 35%. Customers from the southern belt – comprising five states and two union territories (Andhra Pradesh, Karnataka, Tamil Nadu, Telangana, Kerala, Lakshadweep and Puducherry), together borrowed a staggering Rs 14 lakh crore worth of personal loans. This is 19% higher than the Rs 11.7 lakh crore taken out a year before in FY22.

Within the southern region, Karnataka has the highest personal loan consumption of Rs 3.6 lakh crore, closely followed by Tamil Nadu at Rs 3.4 lakh crore. The twin Telugu-speaking states of Telangana and Andhra Pradesh saw personal loan disbursals of Rs 2.9 lakh crore and Rs 2.1 lakh crore, respectively. Kerala has the lowest share within the southern region at Rs 1.8 lakh crore, but the amount is higher than the country's capital city of Delhi that saw Rs 1.6 lakh crore worth personal loan disbursals.

Interestingly, personal loans in Karnataka are higher than the entire eastern region comprising five states and one union territory (Bihar, Jharkhand, Odisha, Sikkim, West Bengal and Andaman & Nicobar Islands) that saw personal loan consumption of Rs 3.5 lakh crore. If you combine both Karnataka and Tamil Nadu, the outstanding of Rs 7 lakh crore is higher than the entire northern region comprising eight states (Haryana, Himachal Pradesh, Delhi, Ladakh, Rajasthan, Jammu & Kashmir, Punjab and Chandigarh) from where customers borrowed Rs 6.4 lakh crore worth personal loans.

The second highest share of personal loan consumption was from the western region, which saw disbursals of Rs 10 lakh crore during FY23. Within the western region, Maharashtra saw the highest share at Rs 7.5 lakh crore, higher than the entire Northern region.

The unstoppable growth in personal loans has evoked mixed responses from fiscal and monetary authorities. While Governor Shaktikanta Das has cautioned lenders over the rising unsecured loan portfolio – particularly, personal loans, credit cards, and microfinance loans – twice in the past six months, Union Ministry of Finance reasoned that the household sector was not in distress and that the rise in financial liabilities was directed towards purchase of real assets like vehicles and real estate.

Meanwhile, state-wise deposit data shows that the western region has the biggest savers, with Maharashtra topping the list at Rs 39 lakh crore worth of deposits. This translates to a 21% share of the all-India deposits of Rs 187 lakh crore. Thanks to Maharashtra's numbers, possibly because of the concentration of corporate headquarters in the city, the western region emerged as the region with highest deposits at Rs 50 lakh crore. The southern states trailed behind at Rs 46 lakh crore worth deposits, followed by the northern region at Rs 39 lakh crore.

Interestingly, both the western and northern regions saw deposits growing in double-digits at 12% and 11.5% respectively during FY23, whereas the southern region saw a single-digit growth of 8%.

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