Consumption loans take a breather in July-September 2023 period, even as delinquencies rise

• Growth in home loan originations remained stagnant in Q2 FY24 due to fall in under ₹35 lakh category.
• Auto loans, credit card loans and consumer durable loans grew in single digits for the quarter.
• Delinquencies improved in all loan segments with the exception of personal loans and credit card loans.
  

India’s retail loan growth moderated in the second quarter of FY24, especially in consumption-led segments like credit cards, consumer durables, and personal loans. A report by TransUnion CIBIL Credit Market Indicator says that it’s because financial institutions tightened the supply of credit.

Growth in home loan originations remained stagnant on a year on year basis overall. The reason being a 4% fall in the origination of loans under ₹35 lakh in Q4 of FY24. Those between ₹35-75 lakh grew by 8%, even as those over ₹75 lakh grew at a healthy rate of 23%.

Auto loans, credit card loans and consumer durable loans grew in single digits for the quarter. Loans for two-wheelers, loans against property and personal loans kept up with double digit growth, but much lower as compared to the same quarter last year.

“The latest CMI indicates continued stability in the Indian consumer credit market, as credit institutions aligned and responded effectively to the market trends over the last year. This stability now provides a strong bedrock for driving balanced and sustained credit growth across products,” said Rajesh Kumar, MD and CEO of TransUnion CIBIL.

Growth in loan originations (YoY)

Loan type	Q2FY24	Q2 FY23
Home Loan	0%	13%
Loans against property	14%	32%
Auto Loan	6%	13%
Two-Wheeler Loan	16%	20%
Personal Loan	28%	72%
Credit Card	5%	74%
Consumer Durable Loan	2%	39%

Source: TransUnion CIBIL

Fewer ‘new’ credit consumers

The share of new-to-credit (NTC) consumers in originations dropped to 14% in Q2FY24 as compared to 17% in the same quarter last year. The share of younger consumers in origination volume also went down by 1%, even as that of semi-urban and rural consumers went up 2%.

“India’s evolving demography includes youth, women and consumers in the semi-urban and rural geographies who typically make up a larger share of first-time credit seekers. The decline in origination volumes for new-to-credit consumers is detrimental to the development of these consumer segments,” the report says.

The delinquencies improved in almost all loan segments with the exception of personal loans and credit card loans where balance-level delinquencies went up by 10 basis points and 23 basis points respectively.

“Lenders must continue to focus on strong underwriting practices and regular and nuanced monitoring of consumer behaviour to drive sustained credit growth and profitability,” said Kumar.