India’s Retail Credit Market Experiences Continued Growth Despite Signs of Risk Build-Up

India’s retail credit market has demonstrated robust growth in the second quarter of 2023, fueled by demand driven by consumer spending, as reported by TransUnion CIBIL. The Credit Market Index (CMI) showed a year-on-year increase in credit supply of 15%, although there are signs of potential risks in certain sectors.

CEO Rajesh Kumar emphasized the overall financial stability of the market while noting that there is still room for enhancing financial inclusion. This observation comes in light of a rise in new account originations among semi-urban and rural consumers, as well as among younger individuals aged 18 to 30. On the downside, there was a 4% drop in the number of new-to-credit consumers.

Small personal loans, particularly those under Rs 50,000, have been closely examined due to their implications for financial stress. These loans have made up about 25% of total origination volumes since January 2022 and have increased among consumers who are already credit-active, especially those with more than four credit products.

The report also highlighted a decrease in serious delinquencies for credit cards and personal loans at the balance level. However, trends regarding early-stage delinquencies on consumption loans revealed an uptick in the fourth quarter of 2022 compared to the same period in 2019. This situation underscores the importance of strong underwriting processes and effective credit risk management to ensure the ongoing health of the retail credit sector.

This article was generated with the support of AI and reviewed by an editor.