Home loans, credit cards witness sharp slowdown in origination volumes

“India’s retail credit growth moderated in the quarter ending June 2024 as financial institutions tightened the supply of credit, particularly on consumption-led products like credit cards, consumer durable loans and personal loans,” according to TransUnion CIBIL Credit Market Indicator (CMI) report for June 2024 quarter.

The CMI — a comprehensive measure of retail lending health trends – for June 2024 stood at 101, same as in June last year. The indicator has remained consistently above 100 since June 2022, highlighting healthy retail lending trends in the country.

It could be noted that in November last year the Reserve Bank of India (RBI) had increased risk weight on the exposure of banks towards consumer credit, credit card receivables and non-banking finance companies (NBFCs) by 25 per cent up to 150 per cent, to check build-up of any risks in these segments. Risk weight refers to the capital banks keep aside as provisioning to cover any loan defaults.

“Timely regulatory guidance and given the relatively high credit-deposit ratio, we are witnessing a moderation in retail credit growth,” said Rajesh Kumar, MD and CEO, TransUnion CIBIL.

The report said originations growth among consumption-led credit products moderated in the quarter ending June 2024, including personal loans.

While home loan originations dropped by 9 per cent (vs – 4 per cent in June 2023 quarter) in volume and credit card originations declined by 30 per cent (vs 8 per cent). In terms of value, originations in credit cards dipped 21 per cent in the three months ended June 2024.

In volume terms, growth in originations in auto loans dipped 2 per cent (vs 10 per cent) and consumer durable loans eased to 4 per cent in June 2024 from 14 per cent in June last year. Personal loan saw a sharp fall in y-o-y origination volume from 36 per cent to 3 cent in June 2024 quarter.

Two-wheeler loans were the only credit product which had a double-digit growth in volume (13 per cent) and value (19 per cent) originated in the first quarter of FY25.

The share of originations for New-to-Credit (NTC) consumers has declined consistently over the past five years. The share of NTC consumers in originations dropped from 16 percent in the quarter ending June 2023 to 12 per cent in the quarter ending June 2024, which is the lowest share recorded in this segment, the report said.

“This indicates significant scope for lenders to drive access to credit opportunities for NTC consumers. Increasing NTC originations will also help lenders reduce concentration risk in their credit portfolios,” the report said.

In terms of delinquencies, credit cards showed a marginal increase in delinquencies at 1.8 per cent (up 17 basis points), continuing the trend set over the last four quarters.