India’s retail credit growth continued to moderate in the quarter ending September 2024, driven by a slowdown in credit demand and a contraction in credit supply across most loan products, according to the latest TransUnion CIBIL Credit Market Indicator (CMI) report. While credit demand remained positive, it hit a two-year low, with mixed performance across loan categories, particularly in consumption-led loans such as credit cards, personal loans, and consumer durable loans.
The CMI, a comprehensive measure of credit market health, declined to 100 in September 2024 from 103 in the same period last year. Although the indicator has remained above 100 since September 2022, the cooling demand and reduced supply have led to a continued moderation in retail credit growth.
Loan origination volumes, a key measure of credit supply, declined year-over-year (YoY) for most retail loan products, except personal loans, which saw an 11% growth—down from 32% in September 2023. Loans against property (LAP) and two-wheeler loans also recorded growth, albeit at a slower pace. However, home loans, auto loans, credit cards, and consumer durable loans saw significant declines in origination volumes.
Portfolio Balances Grow at Slower Pace
Outstanding portfolio balances grew at a slower rate YoY for most retail credit products, except credit cards, which saw a 34% YoY growth in September 2024, up from 26% in September 2023. This surge in credit card spending suggests that consumers may be relying more on existing credit lines to meet their consumption needs amid slower new loan originations.
Delinquency rates improved for secured loan products but worsened for consumption-led loans. The balance-level serious delinquency rate (90+ days past due) for personal loans rose by 14 basis points (bps) YoY, while credit cards saw a 31 bps increase. In contrast, home loans and auto loans reported improvements in delinquency rates.
The report also highlighted that 4.1% of borrowers holding both secured and consumption-led loans were delinquent on their consumption loans, up from 3.9% in September 2023. This trend underscores the need for active portfolio monitoring to mitigate risks in secured loan portfolios.
Mr. Bhavesh Jain, MD and CEO of TransUnion CIBIL, commented on the findings: “The moderation in retail credit growth reflects the impact of challenging global economic conditions, slowing urban consumption, and regulatory measures aimed at stabilizing the credit-deposit ratio. Lenders are adopting a cautious approach to risk management, focusing on higher-income consumers and larger ticket sizes for non-consumption loans.”
He added, “The rise in credit card spending presents an opportunity for lenders to offer customized credit solutions that cater to evolving consumer needs while helping them build stronger credit profiles.”
The report emphasized the importance of leveraging data-driven insights to identify eligible and lower-risk consumers. By understanding changing consumer behavior and spending patterns, lenders can design dynamic strategies to support credit growth while maintaining asset quality.
The moderation in India’s retail credit growth highlights the need for a balanced approach to credit expansion and risk management. While secured loans show resilience, the rising delinquencies in consumption-led loans call for proactive measures to ensure financial stability. As the credit market evolves, lenders must adapt to changing dynamics to sustain growth and support economic development.
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