Loan Enquiries Rise In Rural, Semi-Urban Areas; Lenders Cautious, Reveals CIBIL Report

TransUnion CIBIL has released the findings of the latest edition of its Credit Market Indicator (CMI) report. A lot of interesting retail consumption and loan trends were observed. 

Findings revealed that the CMI figure of 95 for this year was considerably higher than the January 2021 figure of 78, mainly as a result of general growth in the Indian economy.

Rajesh Kumar, managing director and CEO, TransUnion CIBIL, said that they have observed a general increase in their headline CMI measure, and at the same time, they also observed a decline in delinquencies, greater credit inclusion, and growth of credit in the rural and semi-urban areas.  “These fundamentals are laying the foundation for future growth and the continued resurgence of India’s credit market,” he said.

The report also mentioned another unique trend that was observed for loans. Barring auto, two-wheelers, and loan against property (LAP) segment every other loan segment saw a double digit year-on-year (y-o-y) growth in outstanding balances as of March 2022, with consumer durables loans gaining 27 per cent year-on-year (y-o-y).

“Global chip shortage in the auto industry impacted vehicle finance,” the report said.

Here are the other interesting findings from the report.

Loan Trends Observed

Higher young people loan enquiries: According to the report, a more significant proportion of young people, mainly in the age group of 18-30 years, made enquiries about loans. Young people (18-30) formed about 33 per cent of total loan enquiries in the three months ended March 2021, but in the three months ended March 2022, they constituted 38 per cent of loan enquiries. Enquiries by other segments, (31-45 years) decreased by 2 per cent, and for those in the 46-plus age group, it fell by 3 per cent.

TransUnion Cibil found another interesting trend about the origin of these loan enquiries. It was observed that only rural and semi-urban areas posted an increase in loan enquiries, while enquiries from the urban areas stayed flat and those from the metro declined.

“The share of younger consumers and rural and semi-urban borrowers continues to have a higher share. Inquiries—a measure of consumers applying for new credit—registered an all-time high in March 2022, with a robust year-on-year (y-o-y) demand increase,” the report said.

Loan approval rate: Another interesting analogy was found by TransUnion CIBIL, wherein despite higher loan enquiries, lenders were being cautious in lending. In fact, when the data from three months ended March 2021 and three months ended March 2022 was compared, loan approval rates were mostly found lower.

The personal loan segment saw an approval rate of 29 per cent in the three months ended March 2021. In the three months ended March 2022, it was 23 per cent, the report added.

Two-wheeler loans saw an approval rate of 55 per cent in the three months ended March 2021, while in the three months ended March 2022, it was 51 per cent. Elsewhere, the auto loan category saw an approval rate of 44 per cent in the three months ended March 2021, while for the corresponding period ending March 2022, it was 40 per cent.

Top states with higher retail loans: TransUnion CIBIL researched the loan data and found out that “credit health across all major states has improved.” 

They further observed and shared the data pertaining to the top-12 states based on retail lending portfolio. It was found that Haryana witnessed the highest change in credit market index (CMI) at 13 points on a yearly growth, followed by Delhi and Andhra Pradesh at 11 point annual growth, respectively. On the other hand, the lowest change in CMI was observed for Karnataka at 3 points.

“When looking at geographic financial inclusion, the rise of rural and semi-urban borrowers is significant. The latest CMI of March shows that together these groups now account for almost half (47 per cent) of the enquiry volumes – up from 41 per cent in Q1 2020, and 45 per cent in Q1 2021,” observed TransUnion CIBIL.

Lower delinquencies: Delinquency is the condition when a loan customer fails to pay his outstanding debt by the loan due date. TransUnion CIBIL has noted that across various loan segments, such as home loan, auto loan, personal loan, credit card, consumer durable loan, and others, delinquencies were down when compared to a year ago.

“While demand and lending balances increased overall, delinquencies also showed an improvement. At the same time, measures of financial inclusion have also improved. This suggests that consumers are increasingly able to service their borrowing commitments, while also being able to access existing credit or apply for new credit facilities,” added Kumar.