Demand for retail credit makes a comeback in November: CIBIL report

Although year-on-year growth across key metrics has yet to reach pre-pandemic levels, there has been positive momentum for credit demand

The demand for retail credit products in India has steadily increased in recent months including November 2020 following the initial shock from the Covid-19 pandemic earlier this year, according to TransUnion CIBIL’s Industry Insights Report.

Although year-on-year (YoY) growth across key metrics has yet to reach pre-pandemic levels, there has been positive momentum for credit demand.

In November 2020, retail credit demand (as measured in inquiry volumes) was back at 93% of the levels observed in November 2019, and was significantly up from the low levels observed during the early months of the pandemic.

Abhay Kelkar, vice president of research and consulting for TransUnion CIBIL, explains, “The global economy is still suffering from the impact of the pandemic. As businesses and consumers adapt to the challenging situation, we see positive momentum in demand for credit since the initial lockdown earlier in the year.”

It is encouraging to see the renewed demand for credit, as that signals that consumer confidence and the willingness to borrow to fund larger-ticket purchases are on the rise.

The rebound in inquiry volumes has varied significantly across lending categories. The reduced interest rates, attractive payment schemes and discounts offered by developers contributed to an improvement in demand for home loans. The inquiry volumes were up 9.1% YoY in November 2020, CIBIL said.

Conversely, personal loan inquiry volumes fell by -43.1 per cent (year-on-year) as risk appetite of lenders declined. In pre-Covid times, fintechs and non-banking financial companies (NBFCs) had driven much of the growth in this category.  

The picture has changed now with NBFCs seeing a decline of 69.7 per cent YoY in November 2020 as they pulled back from making personal loans available to high risk borrowers. The inquiry volumes for fintechs also declined by 10.2 per cent YoY during the same time period, the report added.