Mumbai: Credit information bureau TransUnion CIBIL on Monday warned that the trend of rising defaults in consumption-led loans such as credit cards, personal loans, and consumer durable loans could spread to secured loans (loans with collaterals such as home loans, loan against property, vehicle loans). It asked lenders to actively monitor the credit behavior of consumers with multiple types of loans, to limit potential risk in the secured loan portfolios of consumers.
Its September 2024 Credit Market Indicator report said that the Balance-level serious delinquencies (measured as 90 days or more past due) by product improved for secured loan products but deteriorated for consumption-led loans. Delinquencies fell 18 basis points for home loans, down 42 basis points for loan against property and down 3 basis points for auto and two wheeler loans. However delinquencies rose by 31 basis points for credit cards, 14 basis points for personal loans and 9 basis points for consumer durables.
TransUnion CIBIL analyzed the delinquency pattern of borrowers who held both consumption-led loans and secured loans, which at 3.7 crore accounted for 15 per cent of retail borrowers. The delinquency trend for these consumers shows that 4.1 per cent of these consumers have at least one Equated Monthly Instalment (EMI) outstanding in only consumption loans. This share has increased from 3.9 per cent for the same period the previous year.
“Delinquency in consumption loans is an early sign of stress for borrowers which may lead to delinquency in secured loans in future. This trend highlights the need for lenders to actively monitor the credit behavior of consumers with multiple types of loans, to limit potential risk in the secured loan portfolios of consumers.”
India’s retail credit growth continued to moderate in the quarter ending September 2024 due to a general cooling in the rate of credit demand growth and a decrease in credit supply across most loan products found the report.
Both loan enquiry (a measure of consumer demand) and origination (in part, a measure of lender supply) volumes of consumption-driven loans declined year-over-year (YoY) in the quarter ending September 2024, except for personal loans. While personal loan origination volumes recorded a double-digit YoY growth, the growth was at a slower pace (up 11 per cent quarter ending September 2024) compared to the same period the previous year (up 32 per cent). Loans against property (LAP) and two-wheeler loans also saw growth in originations, albeit at a slower pace. Origination volumes for all other retail loan products
declined YoY in the quarter ending September 2024.
declined YoY in the quarter ending September 2024.
Speaking on the findings of the September 2024 CMI report, the MD and CEO of TransUnion CIBIL, Bhavesh Jain, said, “Several factors including challenging global economic conditions, slowing urban consumption and regulatory measures designed to stabilize the credit-deposit ratio, have affected the credit market in India."
"The slowdown in consumer credit demand, coupled with a decline in loan originations by lenders, has resulted in a cooling of overall retail credit growth. Identifying eligible and lower risk consumers that can afford to service their credit obligations, will be critical for the sustained growth of credit and the economy,” said Jain.
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