India's credit ecosystem resilient despite Covid-19 pandemic: Experian

The credit information bureau says in a report India's consumer credit market is projected to grow at a higher rate than most major economies globally

The second wave of Covid-19 has hit the new sourcing of loans but India's credit ecosystem remains resilient, according to credit information bureau Experian.

There has been gradual and steady improvement in sourcing trends. New sourcing crossed the pre-Covid-19 level in October 2020. However, sourcing volumes declined from January 2021 onwards due to the second Covid-19 wave and lockdowns being imposed.

Experian and Invest India, the national agency for investment in the report “A Review of India’s Credit Ecosystem” said India’s consumer credit market is  projected to grow at a higher rate than most major economies globally.

The credit portfolio has been resilient, in February 2021 and growth stood at eight per cent year-on-year for the portfolio of key products, lower than the 13 per cent observed for March 2020.

The pace of growth slowed down for all products, however, with unsecured products experiencing a faster year-on-year growth rate compared to secured loans. A recovery was observed across all unsecured credit products, it added.

This will be driven by a shift in India’s demography, a burgeoning affluent middle class ramping up private consumption, as well as growth in rural population, all catalysed by technology.

India’s domestic credit growth has averaged 15.1 per cent from March 2000 to March 2021, primarily driven by retail loans and increasing penetration of credit cards. The Indian consumer credit market continues to expand at a rate higher than most other major economies globally with 22 million Indian consumers applying for new credits every month.

The increase in the purchasing power of an average Indian is driving spending and the country's consumption expenditure is more than double of that in countries like Brazil.

The private final consumption expenditure has been consistently rising over the past five years. India’s household debt has grown at an annualised rate of over 13 percent in the last five years, report added.

With rising affluence, domestic consumption in the last decade has also increased 3.5 times from Rs 31 trillion ($0.42 trillion) to Rs 110 trillion ($1.50 trillion).