Analyzing India’s Retail Credit Market: Insights from TransUnion CIBIL

India’s retail credit market remains on a growth trajectory, driven by increasing demand for credit. However, amidst this boom, TransUnion CIBIL emphasizes the importance of better monitoring delinquencies to ensure the market’s health and stability.

Growth Trends in Retail Credit

According to TransUnion CIBIL’s Credit Market Indicator (CMI) report for the second quarter of 2023, credit supply saw a significant uptick, with originations growing by 15% year-on-year. This growth is fueled by consumption-led demand, reflecting India’s expanding financial inclusion and the influx of new-to-credit consumers.

Managing Director’s Insights

Rajesh Kumar, Managing Director and CEO of TransUnion CIBIL, acknowledges the overall financial stability indicated by the report. However, he underscores the importance of recognizing pockets of risk build-up within the market. India’s credit landscape offers ample room for growth, but prudent risk management is essential.

Four Pillars of Analysis

The CMI report evaluates credit market health across four key pillars: demand, supply, consumer behavior, and performance. Despite the overall stability reflected in the CMI remaining unchanged from the previous year, specific areas require attention.

Emerging Trends and Concerns

While credit supply continues to rise, there are nuances to consider. Notably, originations for new-to-credit consumers have dipped slightly, signaling an opportunity for enhancing financial inclusion efforts. Additionally, certain product categories, such as credit cards and personal loans, have witnessed a marginal increase in delinquencies.

Focus on Small-Ticket Personal Loans

TransUnion CIBIL highlights the surge in small-ticket personal loans and its impact on the retail lending landscape. While these loans contribute a modest percentage to the total loan book, the rising adoption rate warrants attention. Delinquencies on such loans may serve as indicators of broader financial stress among consumers.

Need for Vigilance and Risk Management

The analysis underlines the importance of closely monitoring delinquency trends, especially among early vintage loan products. Lenders are urged to strengthen underwriting processes and credit risk management frameworks to mitigate potential risks associated with rising delinquencies.

Conclusion

In conclusion, while India’s retail credit market presents promising growth opportunities, it also demands heightened vigilance from lenders. By proactively monitoring consumer behavior and implementing robust risk management practices, lenders can navigate the evolving landscape and foster sustainable growth in the long term.