MUMBAI: Loan demand from younger consumers has slowed to a low 6% in the June quarter, down from 9 percent a year ago, but higher demand from semi-urban and rural markets where loan origination volumes rose 9% on-year, helping the overall credit market clip at 10 percent. There was a steep demand slowdown from the 18-35 age group—from 9 percent in the June 2024 quarter to a low 6 percent in the same period this year, Transunion Cibil’s said in its latest report Wednesday.
Within younger consumers, the share of total demand fell to 56 percent in reporting quarter from 58 percent a year ago. Enquiry volumes for personal loans, consumer durable loans, and gold loans remained strong, but credit card demand declined. Loan originations from younger borrowers in metros and urban areas have also dropped by 3 percent over the past two years, the report said.
"The recent dip in credit demand from this younger borrows may reflect a more cautious mindset. While this may be temporary, it is a reminder of how important it is to equip young borrowers with the right tools and support to help them grow confidently along their credit journey," said Bhavesh Jain, chief executive of the agency.
However, loan demand from semi-urban and rural regions registered stronger momentum and with volumes rising 9 percent on-year, helping the overall credit growth to be in the positive territory. Rural and semi-urban markets saw the highest growth in personal loan originations at 15 percent, followed by consumer durable loans at 9 percent and gold loans at 7 percent. The share of these regions in total loan originations edged up to 61 percent, the report said.
"Proactive portfolio monitoring in certain segments such as two-wheeler loans, unsecured business loans and commercial vehicle loans, along with strengthening risk frameworks, is essential for inclusive growth," Jain said.
The credit landscape is evolving with resilience in semi-urban and rural demand, a strategic shift toward secured lending, and stable portfolio performance. These trends signal a maturing market focused on sustainable and inclusive growth," Jain said.
The quarter also saw credit portfolios rebalancing in favour of secured products, transitioning from consumption to collateral-backed lending, with loan against property increasing 23 percent. Asset quality also improved for most products, though emerging risks are visible in certain segments, the report said, adding retail credit market saw a cyclical shift marked by contrasting trends in consumer demand and portfolio performance during the quarter.
Personal loans, consumer durable loans and gold loans remained popular among young borrowers, while credit cards saw a decline. The overall decline in supply was especially visible in metro and urban geographies, where the share of young consumers in loan originations has fallen by 3 percent over the last two years. Home loan origination volumes also grew, by just 2 percent, down from 3 percent on-year, but in value terms, home loan originations rose 6 percent, marginally higher than 5 percent.
For two-wheeler loans, origination volumes fell by 1 percent from a high 15 percent growth, while in value terms growth was slower at 3 percent compared to a growth of 21 percent. As a result of slower growth in unsecured products, credit active consumer base grew only 9 percent, compared to 15 percent. The outstanding balances of secured products continued to grow by double digits, although all at a slower pace than in the same quarter a year ago, with the most significant growth being for loans against property, which rose 23 percent and gold loans, which increased by 26 percent.
Among consumption products, personal loans continue to demonstrate improvement in the 90+ days past due performance. Credit card delinquencies rose 19 bps although they have remained range-bound over the past four quarters, suggesting relative stability despite the slight uptick.