MUMBAI: The credit offtake, which has been tepid for some years but has seen an uptick since October, is likely to see another strong spurt of growth by the end of the current fiscal on the back of seasonal trends, improving asset quality and a gradual recovery in demand, according to the latest TransUnion Cibil report.
The GST rate cuts from the last week of September and the festive demand saw bank credit grown in low double digits, after being in single digit for many quarters, but the underlying trend remains positive. However, the report did not quantify the likely rise in credit demand.
“We do expect that towards the end of the current financial year, specifically March, we do expect demand and supply to go up significantly again,” Bhavesh Jain, chief exectuvie of Transunion Cibil, told reporters here Monday.
Retail credit products, including car loans, two-wheeler loans and consumer durable loans saw strong demand. On the supply side, gold loans also recorded a noticeable jump. Cibil’s credit indicator, which tracks demand, supply, consumer behaviour and asset quality, improved in the September quarter compared to the previous two quarters.
However, the index remains lower than the levels seen in 2023 and 2024, he said and attributed the same largely to the base effect. In 2023, credit growth was unusually strong as the economy rebounded from the pandemic. In contrast, 2025 has seen slower growth and a lower increase in the number of borrowers.
One of the report's key findings is the strong performance of public sector banks, whose credit indicator surpassed that of private banks and non-banking financial companies. Jain said after the pandemic, state-run banks have been strategically building their mortgage and housing loan books, leading to higher portfolio balance growth. "Portfolio quality has improved significantly for state-owned banks which have performed well and hence their credit indicator is the best now," he said.
Another significant trend is the accelerating credit penetration in non-metros, Jain said, adding semi-urban and rural locations have been leading growth for the last three to four years, driven by increased branch penetration of lenders, digital adoption, and the sheer headroom available for credit expansion.
"It's largely the tier-II, III and IV towns and if I have to call out set of geographies… which would stand out would be locations with a population less than 1 lakh," Jain said, calling it an encouraging sign of credit reaching the grassroots level.
On the impact of the GST rate cuts on credit demand, he said, younger borrowers and new-to-credit consumers expanded their share, particularly in semi-urban and rural regions. Consumer confidence is rising on the back of fall in prices due to tax cuts and the resulting increase in retail loan demand signals renewed consumer confidence and market optimism.
"The GST rate cuts seems to have helped boost the retail credit market. With improved affordability, retail borrowers sought more credit," he said, adding the cut was a much-needed step to stimulate economic growth, and its positive impact is evident in the improvement of consumer sentiment and the upward trend in credit demand.