Credit demand in the quarter ending December 2022 remained robust, despite challenging global macroeconomic factors, according to the findings of the latest edition of the TransUnion CIBIL Credit Market Indicator (CMI) report. However, there has been a slowdown in demand for home loans.
CMI findings show a marked increase in demand for credit cards and personal loans, indicating growing adoption of consumption-led credit products that provide convenience and liquidity.
Home loans showed a -1 per cent year-over-year (YoY) decline in demand and -6 per cent YoY decline in supply.
“This trend may signal that prevailing conditions like higher inflation and rising interest rates have impacted consumer sentiment, prompting a conservative approach in taking high ticket loans,” according to the report.
Credit inquiries from 18-30 age group
CMI insights indicate a continued trend of consumers aged 18-30 accounting for the greatest share of new credit inquiries, while the share in demand from rural areas has also increased marginally.
The CMI, which is a measure of retail lending health, hit 100 in December 2022, up from 93 over the same period in 2021. It is a measure of data elements that are summarised monthly to analyse changes in credit market health, and are categorised under four pillars: demand, supply, consumer behaviour, and performance.
Rajesh Kumar, MD and CEO of TransUnion CIBIL, said, “India’s credit market is on a sustained growth trajectory and credit performance continues to remain strong.
“However, in view of the impact of global headwinds, it is crucial to continue to carefully monitor credit risk, especially early delinquencies and leverage ratios.”
Originations fall
Originations – a measure of new accounts opened and a function of both consumer demand and lender supply – fell slightly after the festive season peak of the third quarter of the (calendar) year, according to the TransUnion CIBIL CMI report.
“Approval rates dropped across all loan types as lenders showed more caution than in prior quarters, in the context of global economic conditions.
“This is particularly true among new-to-credit (NTC) consumers, whom lenders typically approach with caution: approval rates for these consumers have reduced from 35 per cent and 32 per cent in December 2020 and 2021 respectively, to 24 per cent in the fourth quarter of 2022,” per the report.
Delinquency trends
Early delinquency measured in Q4 (CY) 2022 for originations from Q2 2022 is lower than the previous year for most products, vintage delinquency trends show.
However, consumer durables loans and credit cards have seen a gradual increase in early delinquencies.
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Vintage delinquencies on consumer durable loan originations from Q2 2022 are two times higher than they were in Q2 2021, while vintage delinquencies on credit cards are also marginally higher for the same period, according to the report.
Some stress has also been observed in recent originations of personal loans and consumer durables loans, with vintage delinquency on these products being higher than the pre-pandemic period.