Credit performance across most retail loan products remained stable in the September quarter, with balance-level delinquencies improving year-on-year for home loans, personal loans, credit cards and gold loans.
The Credit Market Indicator (CMI) for performance rose by five points during the quarter. However, stress in micro loan-against-property (micro-LAP) and small-ticket housing loans stood out, driven in part by higher leveraging among borrowers with exposure to both secured and unsecured credit, according to TransUnion CIBIL.
Early delinquencies in micro-LAP increased by 29 basis points, while small-ticket housing loans saw a 19-basis-point rise, signalling emerging stress in lower-ticket secured lending and underscoring the need for closer monitoring by lenders.
Retail credit demand
At the same time, overall retail credit demand improved during the quarter, supported by festive-season buying and the implementation of GST 2.0. The overall CMI stood at 99 in September, reflecting a largely stable credit environment.
Vehicle loans and consumer durable loans were the key drivers of demand, with consumer durable loans recording the highest incremental growth during the festive period, followed by auto and two-wheeler loans.
Negative growth for young borrowers
Demand momentum was led by semi-urban and rural consumers, who accounted for over half of total demand. Credit demand witnessed negative growth for young borrowers, while growth in new-to-credit customers was flat. However, growth in credit-active consumers slowed to 9% year-on-year, reflecting lenders’ preference of existing customers.
On the supply side, lenders maintained a cautious stance, with originations driven by personal loans, consumer durable loans and gold loans. Prime and above-prime borrowers accounted for 58% of all loan originations, even as secured products such as home and auto loans rebounded after last year’s decline.