Balance-level serious delinquencies, measured as 90 dpd (days past due), improved across product categories, except for credit cards and personal loans. For consumers having at least one small-ticket personal loan, the balance-level delinquency rate was 5.4 per cent, an increase of 120 bps on year, according to the TransUnion CIBIL Credit Market Indicator (CMI) report for the quarter ended June 2023.

“The latest CMI indicates financial stability with healthy retail credit growth and broadly stable delinquency levels, even though a few pockets show signs of risk build-up,” said MD and CEO Rajesh Kumar. The CMI for the quarter ending June 2023 was 100, unchanged from a year ago.

Further, analysis of early vintage delinquency trends showed an increase in Q3 FY23 on consumption loan products, compared to Q3 FY20.

However, small-ticket personal loan delinquencies have a marginal impact on the overall retail loan portfolio, which includes home loans, auto loans, credit cards, and personal loans, among others.

Small-ticket personal loans of less than ₹50,000 currently account for 0.3 per cent of the total retail loan book size at an industry level.

Loan originations

Even though small-ticket personal loans constitute a small share of retail loans in terms of the outstanding balance, the share of such loans in disbursals has risen significantly.

Since January 2022, small-ticket personal loans of less than ₹50,000 have accounted for approximately 25 per cent of total origination volumes. The proportion of credit-active consumers availing small-ticket personal loans increased to 8 per cent in June 2023 from 3 per cent in June 2019.

Owing to this, these loans need to be monitored closely, because “consumers may prioritise other payment obligations ahead of personal loan payments, which in turn may be a wider indicator of financial stress”, said the report.

“The marked increase in the volume of consumption loans, along with velocity indicates, a clear call for lenders to monitor vintage delinquencies closely,” said Kumar, adding that there is a need for strong underwriting process, focussed regular monitoring of consumer behaviour, and robust credit risk management practices.

Customer profile

What has been more alarming than delinquencies is the changing borrower profiles and preferences, with more consumers seeking multiple credit products within a short time span, said the report.

In Q1 FY24, 51 per cent of consumers who availed small-ticket personal loan, already had more than four credit products at the time of availing another new loan, compared to 17 per cent people in June 2019.

Overall loan originations grew 1 per cent y-o-y during the quarter, led by semi-urban and rural consumers. Retail loan originations were up 15 per cent on the back of consumption-led demand.

Originations among younger consumers of 18-30 years, remained steady whereas those for new-to-credit consumers fell 4 per cent.

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