India’s retail lending market has seen a significant shift in FY25, with high-ticket loans gaining preference amid rising stress in small borrowers, increased caution, evolving risks and a broad-based moderation in credit growth.

The overall loan origination value declined in several segments even as affordability concerns rose and credit conditions tightened.    

This trend was captured by credit bureau CRIF High Mark which, in its 'How India Lends: FY25’ report, highlighted a strategic calibration across the credit ecosystem amid macroeconomic headwinds.

The decline was particularly felt in home and personal loans, the main drivers of retail credit. 

Home loan originations growth slowed to 2.6% year-on-year, settling at Rs 10.7 lakh crore in FY25, compared to a 9.4% growth in FY24. In volume terms, the fall was sharper, with originations declining by almost 2 lakh to  34.7 lakh loans in FY25, compared to 36.6 lakh a year ago. 

Origination values shifted toward higher-ticket loans of above Rs 75 lakh in the home loan segment and early stress indicators improved across lenders. Small ticket loans below Rs 5 lakh, on the other hand, continued to show elevated delinquency risks.

Personal loan originations fell to Rs 8.8 lakh crore in FY25 from Rs 9.1 lakh crore in FY24. Volumes, however, rose to 14.6 crore loans, up 8.3% over the previous year. This indicated that there was an increase in average loan ticket size.

“Personal loan originations declined by 2.6% in value, reflecting increased caution amid rising delinquencies. NBFCs gained market share significantly, and high-value loans (Rs 10 lakh+) saw growth, even as lenders faced growing stress in the Rs 1-5 lakh segment,” said CRIF in its latest annual report.

Auto loan growth moderated to a growth of 5.2% YoY to settle at Rs 3.6 lakh crore in FY25. This marked a sharp drop from 15.3% growth in FY24 and a 37.6% rise in FY23. Demand shifted towards higher-value vehicles. 

Two-wheeler loan growth also slowed amid stress in subprime borrower stress, tighter credit norms and rise in delinquencies. Origination value rose by 10.6% to Rs 1.1 lakh crore, compared to 25.1% growth in FY24.

Consumer durable loan originations grew just 3.3% in value to Rs 1.6 lakh crore, despite 11.5% rise in volume. Average loan ticket sizes shrank, capping value growth.

Credit card originations fell sharply by 26.4%, ending a two-year growth run, even as private banks lost 1.7% market share.

“FY25 was marked by recalibration and resilience across the credit ecosystem. As borrowers gravitated towards higher-ticket loans and lenders adapted to evolving risks, we saw a deliberate shift in strategies aimed at managing portfolio quality while addressing market needs,” said Sachin Seth, chairman of  CRIF High Mark and Regional Managing Director for CRIF India and South Asia.

The stress in the microfinance sector lasted much longer than expected, though there are now some signs of improvement.  

According to the report, microfinance lending saw a 13.9% YoY decline in Gross Loan Portfolio (GLP), with smaller ticket loans continuing to contract as lenders shifted focus. Tamil Nadu and Karnataka led the decline in GLP.

There was more stress in the Rs 1-5 lakh segment, with early and mid-stage delinquencies showing an increase.

In the MSME segment, the volume of loans declined 11.4% while they saw a 4.5% rise in origination value. This indicates a growing preference for high-ticket credit and cautious disbursement by lenders.

The average MSME loan size increased to Rs 7.6 lakh in FY25, from Rs 7 lakh in FY24. 

The lending trend, obvious in FY25, could spill over to the current fiscal.

As the market continues to evolve, the shift towards high-ticket loans is expected to persist, the CRIF report said.