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- Growth in credit demand was still positive but at a two-year low, while credit supply declined across most products
- Portfolio balances grew at a slower pace across products, except credit cards
- Although defaults on secured loans decreased year-over-year, defaults increased among borrowers with consumption-led loans, highlighting the need for active portfolio management
Bengaluru, 27 January 2025 – India’s retail credit growth continued to moderate in the quarter ending September 2024 due to a general cooling in the rate of credit demand growth and a decrease in credit supply across most loan products. Additionally, credit performance was mixed with consumption-led loans – defined as credit cards, personal loans and consumer durable loans – showing a deterioration compared to the same period in 2023. These were some of the findings of the TransUnion CIBIL Credit Market Indicator (CMI)1 report for the quarter ending September 2024.
The CMI is a comprehensive measure of data elements that are summarized monthly to analyze changes in credit market health, categorized under four pillars: demand, supply, consumer behavior, and performance. These factors are combined into a single, comprehensive indicator, and pillars can also be viewed in more detail individually. The CMI for September 2024 was 100, lower than 103 in September 2023. While the indicator has remained consistently above 100 since September 2022, the cooling in credit demand along with the contraction in credit supply has led to continued moderation.
Chart 1: Credit Market Indicator (CMI) Sep 2021- Sep 2024
Speaking on the findings of the September 2024 CMI report, the MD and CEO of TransUnion CIBIL, Mr. Bhavesh Jain, said: “Several factors including challenging global economic conditions, slowing urban consumption and regulatory measures designed to stabilize the credit-deposit ratio, have affected the credit market in India. The slowdown in consumer credit demand, coupled with a decline in loan originations by lenders, has resulted in a cooling of overall retail credit growth. Identifying eligible and lower risk consumers that can afford to service their credit obligations, will be critical for the sustained growth of credit and the economy.”
Credit supply declined across most products
Both loan enquiry (a measure of consumer demand) and origination (in part, a measure of lender supply) volumes of consumption-driven loans declined year-over-year (YoY) in the quarter ending September 2024, except for personal loans.
While personal loan origination volumes recorded a double-digit YoY growth, the growth was at a slower pace (up 11% quarter ending September 2024) compared to the same period the previous year (up 32%). Loans against property (LAP) and two-wheeler loans also saw growth in originations, albeit at a slower pace. Origination volumes for all other retail loan products declined YoY in the quarter ending September 2024.
Table 1: YoY Growth in Origination Volumes (Accounts)
| Product | Quarter ending Sept 2023 | Quarter ending Sept 2024 | |||
| Home Loan | 3% | -10% | |||
| LAP | 16% | 3% | |||
| Auto Loan | 12% | -3% | |||
| Two-wheeler Loan | 19% | 4% | |||
| Personal Loan | 32% | 11% | |||
| Credit Card | 9% | -24% | |||
| Consumer Durable Loan | 2% | -6% |
Total origination values for consumption-driven loans also saw a decline YoY, with personal loans down -5%, credit cards down -20% and consumer durable loans at -3%. This YoY negative growth in consumption-led loans volumes and values led to the overall supply pillar of the CMI measure declining to a three-year low of 91 in the quarter ending September 2024, from 95 for the same quarter in 2023.
“Faced with current market dynamics, lenders are taking a measured approach to risk management with a general cooling of origination volumes. In addition, where they are granting non-consumption loans, these are typically for higher amounts catering to high income consumers,” continued Mr. Jain.
Table 2: Origination Volumes by Ticket Size (Quarter ending Sept 2024)
| Product type | Ticket Size | Share of Origination Volumes | YOY Growth | ||||
| Home Loan | INR <35 Lakh | 74% | -12% | ||||
| INR 35L – 1 Cr | 22% | -4% | |||||
| INR >= 1 Cr | 4% | 19% | |||||
| Auto Loan | <10L | 78% | -5% | ||||
| 10L-25L | 20% | 5% | |||||
| >25L | 2% | 4% | |||||
| Two-wheeler Loan | <75K | 31% | -10% | ||||
| 75K-1.5L | 62% | 11% | |||||
| >1.5L | 7% | 19% |
Moderation observed in retail loan portfolio balances
Although still significant, portfolio balances grew at a slower rate YoY in September 2024 for all retail credit products, except credit cards which grew at 34% YoY in September 24 as compared to 26% in September 23. There has been a cooling off in new loan originations for personal loans and consumer durables loans since quarter ending March 24. This may have led to consumers increasing their spending on their existing credit cards to finance their consumption needs.
Table 3: YoY Growth in Outstanding Portfolio Balances
| Product | Sep 23 | Sep 24 | |||
| Home Loan | 16% | 14% | |||
| Loan Against Property | 28% | 22% | |||
| Auto Loan | 25% | 20% | |||
| Two-wheeler Loan | 38% | 29% | |||
| Personal Loan | 30% | 14% | |||
| Credit Card | 26% | 34% | |||
| Consumer Durable Loan | 32% | 23% |
“The marked increase in credit card spending indicates its expanding acceptance among consumers, not only for transactions but also as a tool to access credit. This may be an opportunity for lenders to identify consumers who require additional credit for their consumption and aspirational goals, and service them with customized solutions that are better suited and affordable for them. These customized credit offers should focus on helping the consumer fulfill their needs effectively while also supporting them in building a stronger credit profile,” Mr. Jain said. “By using more comprehensive data insights to understand the changing dynamics of consumer spending and credit usage, lenders can devise dynamic strategies better suited to evolving market conditions while enhancing customer loyalty.”
Delinquencies show mixed picture
Achieving the dual objectives of sustained credit growth while simultaneously maintaining asset quality requires issued loans to be repaid on time to help minimize default risks and preserve financial stability. Balance-level serious delinquencies (measured as 90 days or more past due) by product improved for secured loan products but deteriorated for consumption-led loans.
Table 4: Balance-Level 90+ DPD by Product (September 2024)
| Product | % Balance-level 90+ DPD | YoY change (bps) | |||
| Home Loan | 0.9% | -18 | |||
| Loan Against Property | 1.7% | -42 | |||
| Auto Loan | 0.6% | -3 | |||
| Two-wheeler Loan | 2.1% | -3 | |||
| Personal Loan | 1.4% | +14 | |||
| Credit Card | 2.0% | +31 | |||
| Consumer Durable Loan | 1.5% | +9 |
*Balance level 90+ DPD excludes Asset Reconstruction Companies
TransUnion CIBIL analyzed the delinquency pattern of borrowers who hold both consumption-led loans and secured loans, which at 3.7 Cr. accounted for 15% of retail borrowers. The delinquency trend for these consumers shows that 4.1% of these consumers have at least 1 Equated Monthly Instalment (EMI) outstanding in only consumption loans. This share has increased from 3.9% for same period the previous year. Delinquency in consumption loans is an early sign of stress for borrower which may lead to delinquency in secured loans in future. This trend highlights the need for lenders to actively monitor the credit behavior of consumers with multiple types of loans, to limit potential risk in the secured loan portfolios of consumers.
“Evolving market conditions mean lenders need to take a targeted approach to retail credit growth. Intensive portfolio monitoring, facilitated by innovative analytic techniques, will enable lenders to prudently advance credit to qualifying consumers across India, acting as a catalyst for economic activity and development,” Mr. Jain added.
