Young Borrowers Emerging as a Leading Consumer Segment in India’s Retail Credit Market

Credit growth in India remained robust despite uncertain global macroeconomic factors

Younger consumers continued to drive credit demand 

Consumers in previously unserved and underserved geographies increasingly embraced credit, made possible by digital adoption

Mumbai : TransUnion CIBIL today released findings from the latest edition of its Credit Market Indicator (CMI)* report, which shows that credit demand in the third quarter ending September 2022 remained robust, with a corresponding increase in originations as lenders continued to provide credit opportunities for millions of consumers across India. Consumption-led lending fueled growth amid positive lender sentiment, with credit performance showing consistent improvement year-over-year (YoY). 

The CMI, which provides India’s credit industry with a reliable and contemporary benchmark of retail lending health, reached a level of 100 in September 2022, with younger consumers driving demand and lenders catering to the supply of credit to these consumers. The latest CMI reports that, for the first time, consumers from the 18-30 year-old age group accounted for the largest proportion of inquiries—a measure of consumers applying for new credit— in the quarter ending September 2022. This trend is underlined by rapid growth in consumption-led credit products like credit cards, consumer durable loans and personal loans.

“The fact that 43% of retail credit inquiries were made by consumers in the 18-30 year old age group, compared to 38% in the same quarter in 2021, and 33% in the year before, indicates a major milestone in the evolution of India’s credit market, which now has stronger participation of younger consumers in the credit ecosystem,” said Rajesh Kumar, Managing Director and CEO of TransUnion CIBIL. “Increased access to credit opportunities for younger borrowers has direct correlation to improvement in the quality of life and financial empowerment of India’s youth, who are the drivers of the country’s economic engine.”

The CMI is a comprehensive measure of data elements that are summarized monthly to analyze changes in credit market health, and are categorized under four pillars: demand, supply, consumer behavior, and performance. These factors are combined into a single, comprehensive indicator, and pillars can also be viewed in more detail individually. The latest CMI of 100 underlines the steady growth in India’s robust retail credit market, despite the uncertain macroeconomic factors such as inflation and interest rates that are negatively affecting economies in developed and developing markets around the world. 

Powered by digital channels, lenders driving growth across geographies and consumer segments

The most demanded credit products in the third quarter ending September 2022 were personal loans, followed by credit cards. Inquiry volumes for personal loans increased by 109% YoY, compared to a growth rate of 91% in the same quarter in 2021, while inquiry volumes for credit cards increased by 102% YoY, compared to a growth rate of 33% in the corresponding quarter one year before.

Demand and supply of consumption-led credit products are intrinsically digital in construct. Lenders are swiftly embracing digital processes to reach consumers across India’s geography, providing them access to credit through digital channels. 

Analyses of the CMI at a geographic-level shows that credit reach has expanded in regions that were historically underserved. For instance, Uttar Pradesh has shown the strongest improvement in credit health with a CMI value of 102, an improvement of 19 points YoY. Overall loan originations of retail loans in Uttar Pradesh comprised just over a quarter (26%) that were provided to new-to-credit (NTC) consumers. Credit penetration** in Uttar Pradesh is steadily increasing, reaching 13% in the quarter ending September 2022 from 11% during the same period in the previous year. Uttar Pradesh’s share of consumer durable loans has grown to be 9% of all loans of this type across India, which is an increase of five percentage points compared to the same quarter in 2019.