TransUnion CIBIL Report Reveals Rise in Small-Ticket Personal Loan Delinquencies

TransUnion CIBIL’s Credit Market Indicator (CMI) for the second quarter of 2023 has identified an increase in serious delinquencies at the balance level across most product categories, with the exception of credit cards and personal loans. The report notes that the delinquency rate for individuals with at least one small-ticket personal loan rose by 120 basis points year-on-year to 5.4%. Despite this uptick, MD and CEO Rajesh Kumar emphasized that financial stability remains strong, supported by robust retail credit growth and generally stable delinquency rates.

The report also points out that small-ticket personal loans, defined as those under ₹50,000, represent only 0.3% of the total retail loan portfolio at the industry level. However, there has been a notable increase in disbursals of these loans since January 2022, accounting for around 25% of total origination volumes. While this growth in small-ticket personal loans has had a minimal impact on the overall retail loan portfolio—comprising home loans, auto loans, credit cards, personal loans, and consumption loans—it is nonetheless significant.

Additionally, early trends in delinquency for consumption loan products have increased in the third quarter of FY23 compared to the third quarter of FY20. Lenders have expressed concern over the rising delinquencies in small-ticket unsecured retail loans following a warning from the Reserve Bank of India.

On a positive note, the report indicates that overall retail loan originations experienced a 1% year-on-year growth in the quarter, primarily driven by demand from semi-urban and rural consumers. However, originations among new-to-credit consumers declined by 4%. In the first quarter of FY24, more than half of the individuals who took out small-ticket personal loans already possessed four or more credit products. The report further highlighted that loan originations among younger consumers aged 18-30 remained stable despite evolving borrower profiles.

In analyzing TransUnion CIBIL’s financial stability amid rising delinquencies, it is essential to consider the real-time data and analysis available. Even with a decline in earnings per share, strong earnings are expected to enable continued dividend payments. Furthermore, net income is projected to grow this year, which may alleviate some concerns about profitability.

Current market data indicates a market capitalization of $9.71 billion, alongside a P/E ratio suggesting the stock may be undervalued. As of the third quarter of 2023, the company’s revenue reached $3.779 billion, with a gross profit margin of 65.39%, reflecting strong profitability. Last week, the company experienced a substantial return of 10.09%, despite a decline in share price over the previous three months.

This report provides valuable insights and would be beneficial for anyone interested in a deeper understanding of TransUnion CIBIL’s financial performance and resiliency in light of prevailing market trends.

This article was created with AI assistance and reviewed by an editor.