Retail credit enquiries zoom 54% in February-October, shows data

Increased demand visible across consumption products

The inquiry volumes for consumer loans increased by 54 per cent in the February-October period as India’s economic activity accelerated, driven by demand during the festive season.

According to TransUnion CIBIL data, the number of enquiries had shrunk by 12 per cent compared to the same period the previous year.

The increased demand is visible across consumption products, including personal loans, credit cards, and consumer durable loans, with public sector banks leading the resurgence. There has been a comparable increase in consumer demand against supply.

Rajesh Kumar, managing director and CEO of TransUnion CIBIL, said lenders adapted quickly to the shift via digital channels, which has become the new normal in the pandemic. They have managed to do this by adapting to strategies to keep risk within acceptable limits, Kumar said.

The Credit Market Indicator (CMI) rose to 87 in August from 78 in February, indicating that consumer credit health has improved. CMI is a measure of tracking consumer credit health trends that summarises movements amongst demand, supply, consumer behaviour, and performance metrics into a single indicator over time.

CIBIL said the latest CMI of 87 in August indicates the resiliency of India’s credit market, which is back on a growth trajectory despite the impact of the second wave of the pandemic.

The CMI is not a stationary index. Hence, the level in itself is not indicative of credit health. The CMI number needs to be looked at in relation to the previous period(s) and not in isolation.

A lower CMI number compared to the prior period represents a decline in relative credit health, while a higher number reflects an improvement. The most pronounced impact on retail lending market health was in the first few months of the pandemic in 2020. But, overall, the market has become increasingly resilient as the pandemic has progressed. Between February and May 2020, the CMI fell 17 points from 100 to 83.

The second wave of the pandemic had a significant impact on the nation as a whole. However, the retail credit market was more resilient as lenders adjusted their business models and became better equipped to respond, it added.