Indian Credit Climate: Retail Credit Market Continued Resurgence

India Retail Credit Market Builds on Strong Fundamentals as it Trends Toward Pre-Pandemic Levels

TransUnion CIBIL released findings from the latest edition of its Credit Market Indicator (CMI) report. Its insights showed that the continued resurgence of India’s retail credit industry is built on strong fundamentals. Notably, the CMI’s single headline measure, designed to provide India’s credit industry with a reliable and contemporary benchmark of retail lending health, is trending upwards and showed a similar level in March 2022 (at 95) seen in March 2020 (at 94) which was the last month before the full impact of the pandemic hit (with the first lockdown in India only at the end of this month).

The CMI* is a comprehensive measure of data elements that are summarized on a monthly basis to analyze changes in credit market health and are categorized under four pillars: demand, supply, consumer behaviour and performance. These factors are combined into a single, comprehensive indicator, and pillars can also be viewed in more detail individually. The latest CMI of 95 is up considerably from its low of 78 in January 2021 and continues to show a consistent increase.

Rajesh Kumar, Managing Director and CEO, TransUnion CIBIL, observed: “Not only are we charting a general increase in our headline CMI measure, but also observing decline in delinquencies, greater credit inclusion, and growth of credit in rural and semi-urban areas. These fundamentals are laying the foundations for future growth and the continued resurgence of India’s credit market.”

Strong demand and supply supported by healthy credit performance

Originations—a measure of new accounts opened and is a function of both consumer demand and lender willingness to advance credit—increased across all lender types YoY in March 2022 and were most improved for PVT (private) Banks (up 47%), followed by NBFCs (non-banking financial companies – up 42%). Although PSU (public) banks recorded a comparatively measured increase in originations (still strong at 17%), lenders in this category increased outstanding balances the most – up 17% YoY in March 2022 (PVT: 14%, NBFC: 2%). It should be observed that PSU lenders experienced less of a negative impact in the earlier stages of the pandemic because they were amongst the quickest to resume lending post the initial lockdown, and thus had built up momentum in originations in earlier quarters.

The latest data shows a continued growth in origination volumes for consumption loan products, driven by both improvement in demand for these products and lender willingness to advance credit. Personal loan originations increased 125% YoY in Q1 2022, credit cards 59% and consumer durable loans 21%, indicating positive consumer sentiment towards consumption spending.