Retail loan origination moderates in Q2 as lenders tighten credit flow

The CMI is a comprehensive measure of data to analyse changes in credit market health, categorized under four pillars: demand, supply, consumer behaviour, and performance

Retail loan growth, especially originations, showed moderation on a year-on-year basis in the quarter that ended in September 2023 as lenders tightened the flow of money into segments like credit cards and personal loans, which showed a rise in delinquencies, according to CIBIL’s Credit Market Indicator (CMI) report.

The growth in origination in personal loans declined to 28 per cent in September 2023 from 72 per cent a year ago, and for credit cards, it dipped to 5 per cent from 74 per cent. For housing, it declined to zero per cent from 13 per cent a year ago.

Loan origination is the process by which lenders assess and clear borrower applications for different kinds of loans.

The share of new-to-credit consumers in originations also dropped from 17 per cent in the quarter that ended September 2022 to 14 per cent in the quarter that ended September 2023.

The decline in origination volumes for new-to-credit consumers is detrimental to the development of consumer segments like youth, women, and consumers in semi-urban and rural geographies, typically making up a larger share of first-time credit seekers.

The increased access to credit opportunities has a direct correlation to the improvement in the quality of life and financial empowerment of these consumers, who are the drivers of the country’s economic engine, the credit information bureau said.

CIBIL CMI report showed that the reading for September 2023 was 103, four points higher than September 2022, continuing the rising trend from a low of 88 in September 2021.

Rajesh Kumar, managing director and chief executive officer, TransUnion CIBIL, said: “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 past year. This stability now provides a strong bedrock for driving balanced and sustained credit growth across products.”

The CMI is a comprehensive measure of data to analyse changes in credit market health, categorised under four pillars: demand, supply, consumer behaviour, and performance.

Intensive monitoring of portfolios, while also finding and funding the lower-risk consumers who deserve financial opportunities for fulfilling their aspirations, can set India’s credit industry on the path to long-term growth, he added.