Retail Credit Growth in India Continued to Moderate Across Most Products During Quarter Ending September 2024
Bengaluru: 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.
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.
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.
