In the report titled “Consumption Credit Landscape – II | Growth picks up; Pvt banks continue losing market share across key segments,” the brokerage indicated that disbursement growth improved in most consumption-linked loan categories during the first half of FY26 and the September quarter, reversing the downturn observed in FY25.
Nonetheless, credit cards continued to experience a slowdown, reflecting a more cautious stance from lenders regarding unsecured retail credit.
According to the report, which utilized bureau data from CRIF Highmark, overall disbursement growth in consumption segments varied between 6% and 35% year-on-year during the September quarter of FY26, contrasting with contractions or minimal growth in FY25. JM Financial suggested that this recovery could bolster loan growth in FY27 if trends remain consistent.
Credit card growth lags recovery
In contrast to other unsecured segments, credit cards experienced a significant decline in new issuances. New credit card additions fell by 28% year-on-year in the September quarter of FY26, resulting in a modest 6% increase in cards in circulation, down from a 7% growth in FY25.
Private sector banks continued to lead this segment, responsible for nearly 78% of new card issuances during the quarter. Regarding spending market share, HDFC Bank and SBI Cards gained ground in FY26 year-to-date compared to FY25, as noted in the report.
Asset quality trends in credit cards presented mixed signals. While early delinquencies improved, with a 40 basis point sequential drop in PAR 1–30, stress in the PAR 31–90 segment increased for private banks compared to FY25 levels, suggesting persistent risks within parts of the unsecured borrower base.
Personal loans and consumer durables rebound
Conversely, personal loans demonstrated robust recovery. Disbursements surged by 23% year-on-year in the first half and by 35% in the September quarter of FY26, reversing the previous decline in FY25. Public sector banks spearheaded this recovery, facilitated by a notable rise in average ticket sizes, with asset quality enhancing across lenders and borrower categories.
Consumer durable loans also saw a rebound, with disbursements increasing by 12% in the first half and 19% in the September quarter. Private banks reclaimed market share in this sector, though asset quality trends remained varied, with a rise in longer-tenure delinquencies despite improvements in earlier buckets.
PSBs gain ground in secured lending
The report emphasized a consistent shift in market share towards public sector banks in various secured lending segments. Home loan disbursements rose by 11% in the first half of FY26, with PSBs claiming half of the origination value. Growth leaned towards higher-ticket loans, reflecting increasing residential property prices, while smaller ticket segments showed early indications of stress.
Auto loans and two-wheeler loans also noted modest improvements in disbursement growth, although asset quality deteriorated in auto loans, especially for NBFCs and lower ticket sizes.
Lenders turn cautious on new-to-credit borrowers
JM Financial observed a widespread decline in the share of new-to-credit (NTC) borrowers across segments, particularly in personal loans, two-wheelers, and consumer durables. This trend indicates lenders are favoring seasoned borrowers amid concerns surrounding unsecured credit quality.
“Early delinquencies have either improved or remained stable across most segments, except for auto loans influenced by NBFCs,” the report stated, highlighting a continued cautious approach to underwriting.
The brokerage expressed a selective stance on financial stocks, favoring ICICI Bank, Axis Bank, SBI, City Union Bank, and DCB Bank among banks, and Aditya Birla Capital, Shriram Housing Finance, PNB Housing Finance, and Aadhar Housing Finance among NBFCs and HFCs.
