Credit Supply Index Falls To 91 As New-to-Credit (NTC) Customer Originations Drop 21 Per Cent

India’s retail credit market saw a slowdown in the quarter ending December 2024, according to the latest TransUnion CIBIL Credit Market Indicator (CMI) report. There was a notable decline in credit access for New-to-Credit (NTC) customers, and the CMI fell to 97 from 103 a year ago. This was mainly a result of a cautious lending approach, which affected NTC borrowers and particularly hit consumption-led products like credit cards, personal loans, and consumer durable loans, which saw a 21 per cent year-on-year decline. 

Fall In New-To-Credit (NTC) Customers

In fact, NTC consumers who mostly choose consumption-led products as an entry point into formal credit, accounted for only 17 per cent of loan originations, down from 21 per cent in 2023. However, the younger generations, especially the Gen X ( born 1995 or later), still comprise 41 per cent of NTC borrowers. 

Women are also playing a significant role, and constitute 37 per cent of NTC borrowers, compared to 27 per cent among existing borrowers. Also, 32 per cent of NTC consumers come from rural areas. Though the demographics indicate financial inclusion, the decline in the CMI for credit supply from 95 to 91 points can signal challenges ahead. 

Slow Down In Credit Active Consumers 

The growth of credit-active consumers slowed down to 9 per cent YoY from 16 per cent in December 2023. Only 27 per cent of India’s 1,036 million credit-eligible population was recorded using formal credit. Gen Z, which constitutes 34 per cent of this group, has the lowest penetration at 16 per cent, highlighting a vast underserved market. Home loans and credit cards have seen Y-oY origination declines of 9 per cent and 32 per cent, respectively. Personal loan growth, meanwhile, dropped from 24 per cent to 14 per cent.

Credit Performance Stabilizes 

On the bright side, credit performance indicated stabilisation, with the MI performance index rising to 101 from 100. Personal loan delinquencies (90+ days past due) stabilized at 1.3 per cent. Secured loans like home loans and loans against properties also saw reduced delinquencies. 

Says Bhavesh Jain, the MD and CEO, TransUnion CIBIL: “We have seen that sustainable credit growth can be achieved among NTC consumers by lenders who use advanced information analytics and technology-based solutions. Even though the positive turnaround in delinquencies may not be visible across all products yet, the trend may encourage lenders to actively seek out newer borrower segments while at the same time continuing to focus on risk-based lending.”