In the third quarter of 2023, the Indian retail lending sector experienced a slowdown in growth attributed to a tightening of credit supply by financial institutions, particularly in the realm of consumption-based products such as credit cards, consumer durable loans, and personal loans. This moderation was highlighted in TransUnion CIBIL’s Credit Market Indicator (CMI) report for the same period.

Summary

  1. Introduction
  2. Credit Performance and Delinquencies
  3. Originations and Supply Index
  4. Segment-wise Analysis
  5. Private vs. PSU Banks Disbursements
  6. Growth in Personal Loans Portfolio
  7. Customer Demographics Shift
  8. Outlook and Industry Perspective

Credit Performance and Delinquencies

According to the CMI report, the credit performance improved across various products except for credit cards and personal loans. The balance-level delinquencies, measured as 90 days or more past due, showcased an overall positive trend.

Originations and Supply Index

The report indicated a year-on-year decline in the growth rate of overall originations, leading to a slight decrease in the CMI supply index from 98 in September 2022 to 95 in September 2023. The growth of consumption-oriented credit products, especially personal loans, witnessed moderation during this period.

Segment-wise Analysis

While home loans demonstrated a value growth of 9 per cent, the volume of loans sanctioned remained stagnant on a yearly basis. Notably, low-value home loans (below ₹35 lakh) experienced a decline in originations, whereas loans above ₹75 lakh saw a significant increase, reflecting the escalating property prices in 2023.

Private vs. PSU Banks Disbursements

The number of loans disbursed by private banks increased marginally by 1 per cent year-on-year, contrasting with a substantial 17 per cent rise in PSU bank disbursements. In terms of the loan amounts, private banks recorded a 19 per cent increase in disbursements compared to a 17 per cent increase in PSU bank sanctions.

Growth in Personal Loans Portfolio

The personal loans portfolio expanded by 27 per cent in the same period, although its share in the overall retail credit portfolio exhibited only marginal growth. This signifies a shifting landscape in the lending preferences and patterns.

Customer Demographics Shift

There was a notable shift in customer demographics, with a 3 per cent rise in demand from semi-urban and rural segments, countered by a decrease from new-to-credit (NTC) customers and prime customers. The share of NTC consumers in originations decreased from 17 per cent to 14 per cent during this period.

Outlook and Industry Perspective

Overall, the stability in credit performance lays a strong foundation for balanced and sustained growth across various credit products. The emphasis on portfolio monitoring and identifying lower-risk individuals for targeted financial support holds the key to long-term growth in India’s credit landscape, as stated by MD and CEO Rajesh Kumar.

Note: This analysis is based on the TransUnion CIBIL’s Credit Market Indicator report for September 2023.

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