Retail rise:

1. Retail loan assets under management (AUM) grew 18% Y-o-Y
2. Share of overdue retail loans (31–180 days due) declined to 3.4% from 3.6% in preceding quarter
3. Gold loans AUM increasing 36% year-on-year and fresh originations by 53%

What experts say:

1. Gold is the safest form of investment amidst uncertain market conditions
2. Festival season was twice of what businessmen had expected. GST reduction gave a boost to consumer spending.
3. Private banks, however, have turned cautious on home loans due to reduced net interest margins when deposit costs rise faster than lending rates.
4. Early warning systems being strengthened, financial discipline has improved, and new originated portfolios are exhibiting significantly better behaviour than books built 1-2 years ago.

While overall delinquencies eased, stress persisted in specific pockets. Loans below Rs 1 lakh and Rs 1–2 lakh ticket sizes, used-car financing, two-wheeler loans, and certain micro and small business segments continued to show elevated risk

India’s retail lending ecosystem has staged an impressive recovery in the July–September 2025 quarter, according to various media reports as well as quarterly results published by different lending institutions. Total retail loan assets under management (AUM) grew 18% year-on-year, while quarterly origination growth stood at a healthy 4.5%. Notably, the share of overdue retail loans (31–180 days past due) declined to 3.4% from 3.6% in the preceding quarter, signaling improving asset quality after 14–18 months of stress.

Gold loans emerged as the standout performer, with AUM surging 36% year-on-year and fresh originations jumping 53%. Experts attributed the sharp rise to rising gold prices, economic uncertainty, and the asset class’s inherent appeal as a “safe-haven” collateral that appreciates even after being pledged.MD & CEO of a retail based fincorp described gold loans as “one of the few asset classes that rises after you lend against it” and predicted sustained bullishness for the next five years, aided by recent regulatory convergence in lending norms between banks and NBFCs.

Despite a muted August–September period caused by consumers postponing purchases in anticipation of GST rate reductions on consumer durables and automobiles, experts were unanimously optimistic about the ongoing October–December quarter. A top official of a private bank, noted that the festive season response was “perhaps 2x” what manufacturers and retailers had expected, with uniform growth seen across product categories rather than being driven by any single segment.

While overall delinquencies eased, stress persisted in specific pockets. Loans below Rs 1 lakh and Rs 1–2 lakh ticket sizes, used-car financing, two-wheeler loans, and certain micro and small business segments continued to show elevated risk. Another top official of a credit information bureau pointed out that micro-loans and proprietorship loans remained relatively stressed, though they form a small portion of the total portfolio. 

Digital lender Stashfin reported approval rates of just 1–2% as it deliberately prioritized “thick-file” customers with credit scores above 750 and multi-year bureau history, shunning new-to-credit borrowers entirely for now. Multiple retail lending platforms observed that value growth in the MSME segment significantly outpaced volume growth, indicating that lenders have pruned riskier, lower-ticket exposures at the bottom of the pyramid. 

Public-sector banks continued to gain market share in home loans and showed resilience in auto and credit-card portfolios. Private banks, however, have turned cautious on home loans owing to compressed net interest margins when deposit costs rise faster than lending rates. Credit-card origination has moderated industry-wide after a period of aggressive growth, with issuers now focusing on portfolio cleanup and tighter underwriting to curb revolver defaults and over-leveraging. 

Banking and financial experts agreed that the worst of the credit cycle appears to be behind the industry. Early warning systems are being strengthened, underwriting discipline has improved markedly, and newly originated portfolios are exhibiting significantly better behavior than books built one to two years ago. 

With festive momentum, falling deposit costs, and sustained consumer confidence, most experts expect the second half of FY25 and the coming financial year to deliver stronger, higher-quality growth across retail lending. The credit information bureau executive made it clear that after 14–16 months of tightening and prudent behaviour across the ecosystem, there is no glaring broad-based asset-quality alarm at this moment.” Investors and lenders now eagerly await the next quarter’s data to confirm whether the festive cheer has translated into the robust numbers the industry is hoping for.