Driven by a shift in demography, a burgeoning affluent middle class ramping up private consumption and growth in rural population, India’s consumer credit market is projected to grow at a higher rate than most major global economies.

According to the Experian-Invest India Credit Ecosystem Review report, the factors supporting the consumer credit market would be all catalysed by technology.

Experian is a global information services company, and Invest India is an Indian agency for investment and facilitation.

V-shaped recovery

The report, which tracks India’s credit ecosystem from March 2017 to February 2021, highlights a ‘V’-shaped recovery across Indian markets, with a gradual and steady improvement in sourcing trends.

Neeraj Dhawan, Managing Director of Experian India, said: “The behavioural shift in Indian population has been tremendous just over the last five years. Consumerism has been growing in the previously untapped semi-urban and rural regions as millennials become the main driving force of the mass market. Technological adaption is steep which has, in turn, created acceptance for new financial tools”.

“The biggest beneficiary of this change is the credit market, which is evolving into a self-generating and self-sustaining one. In line with this trend, the risk appetite of traditionally conservative lenders is growing as the horizon of creditworthiness expands. With its array of innovative solutions that help businesses in credit evaluation, smarter lending decisions and safeguarding themselves and their customers from fraud, Experian is at the forefront and one of the main enablers of this shift,” he added.

Domestic credit growth

The country’s domestic credit growth has averaged 15.1 per cent from March 2000 to March 2021, primarily driven by retail loans and increasing penetration of credit cards. The consumer credit market continues to expand at a rate higher than most other major economies globally, with 22 million Indians applying for new credits every month.

The recovery of personal loans has been high in both low (less than Rs 1 lakh) and high (higher than Rs 5 lakh) ticket-size segments, while the recovery in higher ticket-size loans is also improving steadily.

The credit portfolio has been resilient in February 2021, and growth stood at 8 per cent year-on-year for the portfolio of key products, lower than the 13 per cent observed for March 2020. However, the pace of growth slowed down for all products with unsecured products experiencing a faster year-on-year growth rate compared to secured loans.

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