India’s retail credit market has continued to show sustained growth during Q2 2023 on the back of consumption-led demand. Credit supply (originations) grew at 15 per cent year-over-year (y-o-y) compared to the corresponding quarter a year ago, while loan delinquencies remained largely stable, according to the latest TransUnion Cibil Credit Market Indicator (CMI) report for the quarter ending June 2023.
The CMI is a comprehensive measure of data elements that analyses changes in credit market health, categorised under four pillars: demand, supply, consumer behaviour, and performance.
Here are the other findings from the report.
Credit Supply Continues Upward Trajectory
Originations, which is a measure of new accounts opened, continued to grow y-o-y in Q2 2023 with growth among semi-urban and rural consumers (one percentage point increase y-o-y). Among young consumers, (18-30 years), it remained steady, while those for new-to-credit consumers decreased by 4 per cent.
Consumer loans grew by 20 per cent y-o-y, while personal loans and property loans grew by 12 per cent each. Car loan and two-wheeler loans grew by 13 per cent and 18 per cent, each while home loans dropped by 6 per cent, according to the report.
Credit Performance Continues To Improve Across Most Products
Credit performance in terms of balance-level serious delinquencies (measured as 90 days or more past due) improved across product categories, except for credit cards and personal loans in Q2 2023, according to the study. According to the study, this suggests that consumers appear to be managing their credit repayments responsibly.
The loan delinquency rate was the highest in loan against property at 2.18 per cent and lowest in auto loan at 0.69 per cent.
“For consumers having at least one small-ticket personal loan, the balance-level delinquency rate was 5.4 per cent, marking an increase of 120 (basis points) since Q2 2022. Delinquencies on small-ticket personal loans have a marginal impact on the overall retail loan portfolio, which looks at the outstanding balances of all retail products including home loans, auto loans, credit cards, personal loans, and others,” the study said.
According to the report, small-ticket personal loans of less than Rs. 50,000 accounted for 0.3 per cent of the total retail loan book size at an industry level.
“Even though delinquencies on small-ticket personal loans have a marginal impact on the personal loan portfolio, these need to be monitored closely, especially because consumers may prioritise other
payment obligations ahead of personal loan payments, which in turn may be a wider indicator of financial stress,” the study said.
Marked Leverage Build-Up On Small-Ticket Personal Loans
The study also found that since January 2022, small-ticket personal loans of less than Rs. 50,000, while representing a very small share of total retail balances, have accounted for approximately 25 per cent of total origination volumes. As a result, the proportion of credit active consumers availing small-ticket personal loans has increased to 8 per cent in June 2023, from 3 per cent in June 2019.
In Q2 2023, approximately half (51 per cent) of consumers who availed small-ticket personal loan already had more than four credit products at the time of availing another new loan, compared to just 17 per cent in that category in Q2 2019, the report said.
Rajesh Kumar, managing director and CEO, TransUnion CIBIL, said: “The latest CMI indicates financial stability with healthy retail credit growth and broadly stable delinquency levels, even though a few pockets show signs of risk build-up. At the same time, India’s large young population, coupled with low credit penetration in the new-to credit segment, provide huge untapped potential for accelerating credit growth and financial inclusion.”
