Consumer credit growth spirals southward on sluggish secured loan 

Consumer borrowing is increasing at a slow pace as domestic consumption continues to weigh on demand. 

Published: 31st October 2019 01:42 AM  |   Last Updated: 31st October 2019 08:15 AM   |  A+A-

By Express News Service

NEW DELHI:  Consumer borrowing is increasing at a slow pace as domestic consumption continues to weigh on demand. In the second quarter of this financial year, credit balances for consumer loan products grew 17.1 per cent year-on-year in the quarter ended June 2019 compared to 23.5 per cent a year ago on the back of robust growth in unsecured lending categories such as credit cards and personal loans even as growth in secured loan categories such as auto and home loans fell.

A study by credit bureau TransUnion CIBIL showed new personal loans increased by 30.8 per cent, with Non-Banking Financial Companies reporting a growth of 33.7 per cent. The data showed a marked shift in new loans towards ‘near-prime’ and ‘subprime’ borrowers. Near prime borrowers have credit scores between 650 and 700, while subprime borrowers are those with scores between 300 and 650. 

According to the report, 44.8 per cent of new borrowers during the quarter ended June 2019 were those categorised as sub-prime and near prime, compared with 36.4 per cent in the same quarter last year. In the case of personal loans originated by NBFCs, almost 50 per cent were to borrowers in below-prime segments ⁠— an increase of 8.5 percentage points over the quarter ended June 2018.

However, sluggish passenger vehicle sales and affordability constraints in the housing market limited credit growth in secured lending, dragging the growth rate of unsecured lending. New auto loans increased by 7.7 per cent during the period under review. 

Banks saw decline in new auto loans, while non-banks saw a 9.4 per cent increase — much lower than the 24.5 per cent growth last year. In the home segment, new loans contracted 6.3 per cent. NBFCs saw an 18 per cent decline in new loans disbursed, in sharp contrast to 16.3 per cent growth in the second quarter last year. Loans against property also declined 20.9 per cent over last year.


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