Retail credit growth slows in Q4 FY25 despite rate cut: CIBIL report

The retail credit market continued to see a softening in the last quarter of 202425, as new loan originations (partly a measure of credit demand and supply) grew at a slower rate of 5 per cent in March 2025 against 12 per cent a year ago, according to a report.

The slowdown was despite the RBI slashing its benchmark lending rate by 25 basis points to 6.25 per cent in February.

This and other factors pushed the Credit Market Indicator (CMI) to a two-year low of 97, according to TransUnion CIBIL's June 2025 Credit Market Report.

A higher CMI reading indicates improving credit market health, while a lower reading indicates a decline.

"The muted demand was more pronounced among consumers 35 years old or younger. Consequently, the share of New-to-Credit (NTC) consumers that lenders supplied decreased by three percentage points during the same period, given that a large share of younger consumers constitute the NTC segment," it said.

However, it said, signs of improving credit performance emerged, particularly through consistent month-over-month declines in credit card delinquencies from January to March 2025.

The slowing of credit demand from younger consumers was evident from the fall in the share of enquiries from those aged 35 years or younger to 56 per cent for the quarter ending March 2025, down from 58 per cent in the quarter ending March 2024.

The report said across all other loan products, with the exception of personal loans, the growth in volume was lower than the growth in value, which indicates a preference for higher-value loans.

The increases in the share of high-ticket home and two-wheeler loans indicate a preference among lenders for loans backed with high-value assets.

Home loans above Rs 1 crore grew 9 per cent year-over-year (YoY) during the quarter ending March 2025, compared to a negative growth of 7 per cent for the entire home loan segment in the year-ago period, the report said.

Similarly, two-wheeler loans above Rs 1.5 lakh grew 7 per cent YoY during the quarter ending March 2025 against a negative growth of 1 per cent a year ago.