Several contributory factors of retail lending market has changed. Retail lending may end up being a business cycle or interest rate cycle play. Lenders with competitively better models and credit decision framework will grow more profitably than others in a scenario where high risk-adjusted growth is not a given. Investors: Seek more disclosures and sharper due diligence. At least some of the hubris in the current retail landscape may be attributable with respect to fintech new age lenders. The Budget 2025-26 is expected to increase discretionary income. SBI Research estimates that taxpayers will save an estimated Rs 1 lakh crore in taxes. Recently, RBI reduced repo rate after almost five years. Some expect these may check the sequential deterioration in unsecured retail portfolio. Any improvement, however, is likely to be temporary. It may be acknowledged that, they got some help from the structural factors. However, some of these enablers have changed: Credit penetration used to be much lower. New-to-credit (NTC) borrowers formed a substantial portion (25% to 40%) of retail loans. NTC are not high risk borrowers, and typically have delinquency levels much better than sub-prime borrowers. The game has opened up .Players of some scale but more integrated digital underwriting , supported with well-designed and best in class risk analytics will corner much higher share of profit pool than suggested by the proportion of their loan book. However digital laggards and haphazard digital adopters may observe asset growth but their profitability from retail lending may dwindle further.
