Retail Credit Growth Slows In Q2FY24, Card Originations Drop 30%
Moderation in small-ticket loans and a decline in new-to-credit volumes present opportunities for financial inclusion
India’s retail credit growth moderated during the quarter ending June 2024 as financial institutions tightened their supply of credit, particularly in consumption-driven products such as credit cards, consumer durable loans, and personal loans. The latest TransUnion CIBIL Credit Market Indicator (CMI) report revealed a noticeable slowdown in credit originations for small-ticket loans, though credit performance has improved across most products, except for credit cards.
The CMI for June 2024 stood at 101, remaining stable compared to the same period in 2023. While the retail credit market continues to demonstrate overall resilience, the CMI findings showed a year-on-year decline in originations across most major credit products. Credit supply saw a drop from 95 in June 2023 to 91 in June 2024.
Credit card originations experienced the sharpest decline, falling by 30 per cent year-on-year, followed by a 9 per cent decline in home loan originations. Personal loan growth also slowed significantly, dropping from a robust 36 per cent growth in June 2023 to a mere 3 per cent in June 2024. Two-wheeler loans, however, continued to show double-digit growth, rising by 13 per cent in volume.
Decline In Loan Originations
Another key finding from the report was the decline in the share of New-to-Credit (NTC) consumers, which dropped to a record low of 12 per cent in June 2024, compared to 16 per cent in the same quarter last year. This trend presents an opportunity for lenders to enhance financial inclusion by expanding access to credit for these first-time borrowers.
“Sustainable credit growth can be achieved by identifying and providing access to credit for these New-to-Credit consumers using information analytics and technology-based solutions,” said Rajesh Kumar, MD and CEO, TransUnion CIBIL. With India’s young population, particularly millennials and Gen Z, entering the credit marketplace, Kumar sees emerging growth opportunities across socio-economic categories and geographies.
Credit Performance Improves, Except For Credit Cards
The CMI for consumer performance rose from 96 in June 2023 to 102 in June 2024, indicating improved credit performance across most products, with a decline in delinquencies for home loans, auto loans, and consumer durable loans. However, credit cards showed an uptick in delinquencies, continuing a four-quarter trend, with a 17 basis point year-on-year increase in serious delinquencies.
As digital transformation continues to reshape the credit market, lenders are advised to maintain a balance between convenience and risk management. "Regular monitoring of early warning signals and timely actions will be crucial in managing portfolio quality while sustaining growth," Kumar added.
With retail credit growth slowing and new-to-credit volumes declining, financial institutions are positioned to focus on financial inclusion by identifying deserving NTC consumers and improving access to credit, which could drive the next phase of growth in India’s retail credit market.
