Signalling that a major economic boom in India may be in the offing, a latest study estimates that nearly 150 million consumers who are currently not ‘credit active’ are potentially eligible to become retail credit borrowers. Tapping into this untapped huge potential borrower market could provide significant growth opportunities for retail lenders and provide a major boost to the Indian economy, a TransUnion CIBIL study said.
According to the report, the total population of credit-eligible consumers in India is roughly 220 million, out of which only about one-third—72 million—are currently ‘credit-active’, or have a live account with a bank or lending institution. The remaining population, a whopping 150 million are not currently credit active, but would meet the age and income requirements that would make them potentially attractive to lenders, said the report. Notably, this group includes two set of consumers, the first, who were previously credit active but are currently dormant, and second, those who have never availed a retail loan or credit card.
The retail lending market could see a major boom with the addition of these incremental growth opportunities for credit products such as credit cards, personal loans and consumer durable loans, the report noted.
“After significant growth in retail lending over the past decade, many lenders and industry observers have asked whether the retail credit market is nearing the saturation point and could soon face a slowdown. Our study paints a much brighter picture for the industry,” Yogendra Singh, Vice President of Research and Consulting for TransUnion CIBIL said. According to the expert, this untapped market presents an opportunity for sustained, prudent growth for lenders over the next five years and beyond. “Lenders need to find ways to reach this untapped market, which likely has credit needs that are not being met currently,” he observed.
The TransUnion CIBIL study calculated that approximately 220 million consumers meet the target age range—from 20 to 69—and minimum income level, which is assumed as at least Rs 250,000 per year, to be attractive to lenders for retail credit products. “This addressable market size is forecast to continue to grow at a rapid pace, as more consumers enter the target age range and economic growth raises income levels.
The study forecasts that the addressable market will increase by 14-16 million consumers per year, reaching an estimated 295 million by the end of 2022,” the report said. According to Singh, as more consumers reach adult age and have disposable income, they will increasingly seek credit to help finance purchases of housing, vehicles, and household goods. “As well, in an increasingly digital marketplace, they will want credit cards to help facilitate online transactions. These developments bode well for continued robust growth in the retail lending market,” continued Singh.
Apart from a robust economic boom due to potential eligible borrowers, the study finds that household debt levels in India as a percentage of national income are modest in comparison to other emerging countries such as China, Brazil and South Africa. If India follows the growth trajectories of other countries, total household debt could increase from Rs 37 trillion at the end of 2017 to between Rs 78 – 94 trillion by the end of 2022, noted the report. This supports the conclusion that Indian households will have additional borrowing capacity and could continue to finance growing consumption levels.