‘microfinance Worries Me’: Deepak Parekh Sounds Alarm On Risky Loans And Retail Credit Binge

Former HDFC president Deepak Parekh flagged 2 rising concerns successful India’s banking scenery — microfinance accent and nan unchecked maturation of unsecured lending — during a candid podcast speech pinch erstwhile ICICI Bank main Chanda Kochhar.

“Microfinance worries me,” Parekh said, pointing to alarming plus erosion ratios (AERs) and soaring non-performing assets (NPAs). “If you see—15% to 18% NPA—you don’t get a separator of that much. And nan number is besides staggering. What I publication was astir ₹60,000 crore successful NPAs connected a ₹3–3.5 lakh crore book.”

Parekh, who led HDFC done decades of financial evolution, said these trends are not conscionable statistical blips but awesome systemic stress. He expressed adjacent interest complete nan fierce push by NBFCs and banks into unsecured individual lending. “There is simply a small rumor successful unsecured loans,” he warned, citing rising defaults and risky underwriting practices.

He stressed nan value of indebtedness subject astatine nan unit level too. “I deliberation only 25% of someone’s income should spell toward indebtedness repayment,” Parekh advised. “You request nan equilibrium for your family, upkeep, taxes.” The exception, he noted, is for ultra-high nett worthy individuals.

While he acknowledged India’s unit in installments penetration remains low—consumer in installments stands astatine 40% of GDP versus 70% successful China and nan U.S.—he warned that gathering early request will beryllium difficult unless banks tin money that growth. “Retail request is rising, but nan banks request money to do that,” Parekh said.

He besides flagged debased security penetration and anemic family savings arsenic structural headwinds. “This is simply a interest nan RBI will person to tackle,” he said, calling for be aware moreover arsenic India’s financial aspirations proceed to soar.

Published on: Jun 21, 2025 11:24 AM IST