India Retail Credit Market Health Stronger Than Pre-Pandemic Levels
India, October 20, 2022 – TransUnion CIBIL today released findings from the June edition of its Credit Market Indicator (CMI) report, which showed that credit demand in the second quarter of 2022 exceeded pre-pandemic levels with a corresponding increase in new accounts opened. This reflects continued robust growth in the Indian credit environment, despite global economic headwinds.
The CMI provides India’s credit industry with a reliable and contemporary benchmark of retail lending health, and reached a level of 99 in June 2022 – the same level seen in December 2019, before the COVID-19 pandemic hit the Indian economy.
The CMI* is a comprehensive measure of data elements that are summarized monthly to analyze changes in credit market health, and are 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 latest CMI of 99 is up four points from the previous quarterly measure in March 2022, and a significant 21 points up from its low of 78 in January 2021 at the height of the COVID-19 surge. This is supported by significantly improved credit health in the top 12 states in India, with the CMI value in Karnataka and Kerala both increasing by 16 points, and the CMI value in Tamil Nadu, Andhra Pradesh, and Rajasthan all increasing by 14 points over the preceding 12 months.
“Supported by progressive government policies and active implementation by ecosystem players, momentum has returned to India’s credit market. Retail credit portfolio balances continue to show strong recovery across products, with home loan balances growing by 15%, auto loans by 13%, consumer durable loans by 61%, credit card by 32%, and personal loan balances by 29%, year-over-year to June 2022,” informed Rajesh Kumar, Managing Director and CEO of TransUnion CIBIL.
“The Indian credit environment has shown signs of strong recovery, with improvement in credit activity as well as positive lender sentiment,” continued Kumar. “Credit performance has consistently improved year-over-year, with generally lower delinquency levels. The time is ripe for lenders to identify many credit-eligible consumers across India’s geography and reach them to provide easy and quick access to credit while delivering a positive experience.”
Chart 1: Monthly CMI (December 2019 to June 2022) i
(i) When selecting certain variables, year-over-year (YoY) movements are analyzed to remove the effects of seasonality. The increase in April 2021 CMI was temporary and driven primarily by an exponential increase in inquiries and originations in April 2021 compared to a lower base of April 2020. Inquiry and origination volumes increased YoY by 8.5 times and 5.2 times respectively in April 2021.
(ii) The June 2022 CMI value is provisional and subject to revision as additional data are reported to the TransUnion CIBIL credit bureau.
Portfolio balances continued to show strong recovery across products, with improvement in credit activity and positive lender sentiments towards growth.
YoY Growth in Outstanding Balances (Jun-2022)
|Loans Against Property||6%|
|Two Wheeler Loan||6%|
|Consumer Durable Loan||61%|
This increase in portfolio balances was seen at the same time as serious delinquency rates dropped, measured by the percentage of balances 90 or more days past due. This measure fell by 276 basis points (bps) YoY in June 2022 for two-wheeler loans, 249 bps for LAP, and 139 bps for consumer durable loans.
More young people applying for credit
TransUnion research revealed that the share of younger Indian consumers opening new credit products has grown steadily over the last two years. In June 2022, one-third of originations (33%) were among consumers aged 18 to 30, having increased from 22% in 2020. Simultaneously, 32% of originations were from below-prime borrowers**, compared to 28% in Q2 2019, indicating greater lender appetite to expand credit access to a wider spectrum of consumers.
In June 2022, 23% of originations were among consumers in metro areas, compared to 25% in 2019 previously, with the percentage of originations in non-metro areas having increased by two four percentage points over the last three years.
“More young people, and more people in non-metro areas, are applying for credit. Lengthy approval processes and other negative experiences can lead to these consumers to abandon the application process or turn to another, more frictionless lender. While identity checks and fraud prevention measures are an important part of any credit application process, these must be balanced against a streamlined process and quick feedback on applications. Lenders who are able to properly balance risk management and customer experience will be those who are best positioned to succeed in this competitive market,” Kumar concluded.
* The TransUnion CIBIL Credit Market Indicator (CMI) is an evolving model which is regularly reviewed to ensure the most relevant variables and their relative weighting are selected to best chart the credit health of India’s lending market. When selecting certain variables, year-on-year movements are analyzed to remove the effects of seasonality.
** Credit Tiers based in CIBIL Score range: Subprime:300-680, Near Prime: 681-730, Prime: 731-770, Prime Plus: 771-790 , Super Prime: 790+