Expanding Indian consumer credit mkt being led by unsecured lending

ST CORRESPONDENT
Friday, 29 March 2019

“Consumer credit continues to be a key driver for the Indian economy. Although GDP growth has decelerated in recent quarters, the rate of overall consumer lending growth in India is still significantly higher than for most other major economies in the world,” said Yogendra Singh

MUMBAI: The newly-released TransUnion CIBIL CYQ4 2018 Industry Insights Report (IIR) shows the Indian consumer credit market continued to expand over the past year thanks to strong growth in the major unsecured lending categories of credit cards, personal loans and consumer durable loans. Between them, at a total balance level, these categories grew 31.3% in CYQ4 2018 compared to the same period the year before.

Secured lending categories - loans against property (LAP), auto loans and home loans -experienced more moderate total balance growth by comparison, expanding at the still-robust levels of 21.8%, 17.4% and 17.1%, respectively over the year ended CYQ4 2018. These healthy growth levels demonstrate that credit demand by Indian consumers remains strong and that where possible lenders have continued to make credit available to borrowers to meet that demand. 

“Consumer credit continues to be a key driver for the Indian economy. Although GDP growth has decelerated in recent quarters, the rate of overall consumer lending growth in India is still significantly higher than for most other major economies in the world,” said Yogendra Singh, Vice President of Data Science and Analytics for TransUnion CIBIL. 

“As Indian lenders continue to increase in size and complexity and look to expand the universe of consumers they can prudently extend credit to, they are evolving their underwriting capacity and sophistication accordingly with new data sources and analytic tools. This continued evolution is increasingly important in maintaining retail lending growth as external factors like funding availability present potential headwinds.”

According to data from Oxford Economics, year-over-year GDP growth for India slowed to 6.6 per cent in CYQ4 2018, compared to 7.0 per cent in the third quarter and levels above 7 per cent in the first half of 2018.

Growth across all sectors belies moderating lender appetite

All major consumer lending products experienced double-digit percentage growth in the total number of accounts in the 4th quarter. 

Encouragingly, the largest product segment by number of accounts - credit cards - also experienced one of the highest rates of growth, both in total balances and in the number of accounts (these measures increased 31.4 per cent and 28.6 per cent, respectively, on a Year on Year basis in CYQ4 2018). 

More than 25 million Indian consumers had credit cards at the end of 2018, an increase of nearly 50 per cent compared to the end of 2016, which was immediately following the demonetisation event of November 2016.

“The significant expansion in consumer credit card access over the past two years may be in part attributable to the experience of the demonetisation event. Consumers see the importance and value of credit cards in facilitating spending as well as in providing access to liquidity and borrowing power,” said Singh.

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