MUMBAI: Retail credit growth, which has been sizzling hot till the Reserve Bank last November asked banks to go slow on these better-margin yielding products has finally begun to moderate led by personal loans and credit card spending.
Growth in personal loans fell from 36 per cent growth in June 2023 quarter to a low three per cent in the June 2024 period while credit card spending dropped from 8 per cent to minus 30 per cent in the same period.
According to the latest quarterly data from the credit information company Transunion Cibil, the moderation in the reporting quarter has been due to financial institutions tightening credit supply, particularly on consumption-led products like credit cards, consumer durable loans and personal loans.
However, credit performance, as measured by balance-level delinquencies, has improved across most products, apart from credit cards.
Growth moderated across all credit products, particularly on small-ticket loans, which SBI chairman CS Setty had last week admitted that there was mounting stress.
The continued decline in new-to-credit volumes, especially when younger consumers are entering the credit marketplace for the first time, indicates an opportunity for lenders to drive financial inclusion given the largely young population, the report added.
Home loans continue to degrow: from minus 4 per cent degrowth in June 2023, its degrowth accelerated by three times to minus 9 per cent, loan against property have lost steam from 13 per cent to 2 per cent; auto (car) loans from 10 per cent to 2 per cent, two-wheeler loans from 17 per cent to 13 per cent during this period.
Personal loans on the other hand were clipping at 36 per cent in the June 2023 quarter and decelerated to a low of 3 per cent in the June 2024 quarter while credit card spends, from a positive 8 per cent to degrew to a steep minus 30 per cent.
Consumer durable loans on the other lost steam from 14 per cent to 4 per cent, the Cibil report said.
The report also found that the share of loan originations for new-to-credit consumers hit at a record low and this has been consistently falling over the past five years.
Such customers’ share in originations dropped from 16 per cent in the June 2023 quarter to 12 per cent in the June 2024 quarter, which is the lowest share recorded by Cibil for this segment.
Among the 254 million in the 15-24 age bracket, only around 99 million opened their first credit product in Fy24. Millennials (or those born between 1980 and 1994) made up the largest part of this group with 35 percent, followed by Gen Z (born from 1995 and later) at 22 per cent.
Nearly half (48 per cent) of first-time borrowers who open their second credit product within a year, do so with the same lender who provided them their first loan.
However, credit quality continued to improve across most products, except for credit cards with the credit index improving by six points from 96 in June 2023 to 102 in June 2024, reflecting the continued improvement in overall balance-level serious delinquencies (measured as 90 days or more past due) across most product categories.
In contrast to all other credit products, credit cards showed a marginal increase in delinquencies, continuing the trend set over the last four quarters.