Retail loan defaults in India are causing concern about potential risks to the broader economy as aggressive lending practices are being scrutinized.

Reports from major lenders like Kotak Mahindra Bank Ltd. and IndusInd Bank Ltd. have indicated increased stress in unsecured loans during their second-quarter earnings, leading to a decline in their stock prices.

Smaller financial institutions, such as Ujjivan Small Finance Bank Ltd., which specializes in smaller-ticket loans, have been particularly affected. The bank's stock has dropped by over 30% this year, reflecting investor anxiety about the sustainability of such lending practices.

The impact of these defaults is being closely monitored, with potential implications for the overall financial stability in India.