Young Indians Drive Credit Demand, Growth In Consumption-Led Credit Products: CIBIL Report

The findings shared in the latest edition of Credit Market Indicator (CMI) report released by TransUnion CIBIL shows that credit demand in the third quarter ending September 2022 remained robust in the country with young Indians taking responsibility for driving credit demand. The CMI report said that “India’s lending health reached a level of 100 in September 2022, with younger consumers driving demand and lenders catering to the supply of credit to these consumers.”

The latest CMI reports reveals that, “for the first time, consumers from the 18-30 year-old age group accounted for the largest proportion of inquiries—a measure of consumers applying for new credit— in the quarter ending September 2022.” This trend is reportedly underlined by rapid growth in consumption-led credit products like credit cards, consumer durable loans and personal loans.

Rajesh Kumar, managing director and CEO of TransUnion CIBIL said, “the fact that 43 per cent of retail credit inquiries were made by consumers in the 18-30 year old age group, compared to 38 per cent in the same quarter in 2021, and 33 per cent in the year before, indicates a major milestone in the evolution of India’s credit market, which now has stronger participation of younger consumers in the credit ecosystem.”

Kumar further noted that “increased access to credit opportunities for younger borrowers has direct correlation to improvement in the quality of life and financial empowerment of India’s youth, who are the drivers of the country’s economic engine.” 

The CMI is a comprehensive measure of data elements which are categorised as demand, supply, consumer behaviour, and performance. Interestingly, the latest CMI of 100 underlines the steady growth in the country’s robust retail credit market, despite the uncertain macroeconomic factors such as inflation and interest rates that are negatively affecting economies in developed and developing markets around the world.

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As per the report, the most demanded credit products in the third quarter ending September 2022 were personal loans, followed by credit cards. Inquiry volumes for personal loans reportedly increased by 109 per cent year-on-year, compared to a growth rate of 91 per cent in the same quarter in 2021, while inquiry volumes for credit cards increased by 102 per cent as compared to a growth rate of 33 per cent in the corresponding quarter one year before. 

The report noted that “Uttar Pradesh has shown the strongest improvement in credit health with a CMI value of 102, an improvement of 19 points YoY. Overall loan originations of retail loans in Uttar Pradesh comprised just over a quarter (26 per cent) that were provided to new-to-credit (NTC) consumers.

In terms of increased credit penetration, the report said that over the last three years, between September 2019 and September 2022, credit penetration has improved across age groups. “Consumers in the 18-30 years age group who have availed at least one credit product increased from 14 per cent to 19 per cent; in the 31-45 year age group, it increased from 26 per cent to 35 per cent; and from 23 per cent to 32 per cent among the 46+ year cohort.”

Interestingly, the number of inquiries emanating from rural areas has increased by one percentage point each year, from 20 per cent in September 2020 to 22 per cent of all inquiries in September 2022, while inquiries from urban and semi-urban areas have remained consistent at 21 per cent and 26 per cent respectively over the last three years, the report said.  

“Growth and demand continue to come from younger consumers, and those who have historically been unable to experience the benefits of financial inclusion due to their location, or their lack of connectivity,” Kumar said adding that, “this is also likely due to an improvement in economic activity that has resulted in a continued growth trajectory for credit demand across India, which is currently at a three-year high.”  

Credit supply continues to grow in line with the growth in demand, with semi-urban and rural consumers accounting for 56 per cent of originations, and younger consumers (18-30 years age group) accounting for 37 per cent of originations – an increase of six percentage points.  

As per the analysis of the latest CMI, a marked improvement in borrower profiles, with nearly one-third (32 per cent) of consumers holding a prime credit score, up four percentage points from the same period in 2021, the report said. Importantly, while credit demand and outstanding balances increased, credit performance has remained strong, with balance-level delinquencies improving year-on year in September 2022 across all major credit products. This is a clear indicator of sustainable and profitable growth for lenders.