Money & Banking

Retail credit demand outlasts festival season: TransUnion CIBIL COO

NARAYANAN V | | | Updated on: Dec 25, 2021

Harshala Chandorkar, COO, TransUnion CIBIL

Credit-card spending crossed all-time high of ₹1-lakh crore in October

Retail credit demand, which witnessed strong recovery after the second wave of the Covid-19 pandemic, continues to sustain even after the festive season, according to Harshala Chandorkar, COO of TransUnion CIBIL.

“What we have typically seen is that the retail volume has gone up almost to pre-Covid levels. It was primarily driven by demand for personal loans, credit cards and consumer durable loans,” she said.

“We initially thought it (retail credit growth) was on account of festive season but now we see it sustaining even after Dussehra and Diwali. It is a positive sign that there is buoyancy in the market,” she added.

Aggregate credit data

In its maiden credit market indicator (CMI) released recently, TransUnion CIBIL said the country’s retail credit market is positioned for strong growth with a resurgence in credit demand and supply.

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Built using aggregate and depersonalised consumer credit data, CMI considers the impact of hundreds of credit variables reported by banks and non-banking lenders and identifies those that are most significant to changes in consumer credit trends.

Relevant data elements are then categorised under four pillars — demand, supply, consumer behaviour and performance — to arrive at a single indicator.

Steady growth

The report said, “The latest CMI of 87 in August 2021 (up from 78 in February 2021) indicates the resiliency of India’s credit market which is back on a growth trajectory despite the second wave of the pandemic.”

“The CMI has further increased to 91 in September. Banks are looking at cross-selling and up-selling credit products to their existing customers,” Chandorkar added.

According to Reserve Bank of India’s December Bulletin, outstanding personal loans on a year-on-year basis has grown by 11.7 per cent to ₹29.55-lakh crore as of October from ₹26.46-lakh crore during the same period last year. Under personal loans, the consumer durables category witnessed a 44.4 per cent y-o-y jump while credit card outstanding witnessed a 11.9 per cent jump during the period.

BNPL demand

“Buoyed by the consumption boost during the festival season, credit card spending jumped 56 per cent (y-o-y) to cross an all-time high of ₹1-lakh crore in October,” the RBI said.

Chandorkar also highlighted that within the personal loan category, the demand for buy now pay later (BNPL) products has picked up substantially on the back of new-age fintech NBFC players.

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“Through the end of 2017 and into 2018, stronger economic growth and entry of fintech and other non-bank lenders — collectively known as non-banking financial companies (NBFCs) — created greater demand and supply in the market”.

Asked if the rapid growth in BNPL products could lead to some kind of stress in the retail segment, Chandorkar said TransUnion CIBIL is working with all fintech NBFCs to ensure that they report their on a regular basis.

“These are typically small ticket loans and if an individual is taking ₹5,000 loan from ten fintechs, then he may be over-leveraged,” Chandorkar said, adding, “We are working very closely with the industry and providing them with insights and solutions for prudent risk management in their lending practices.”

Published on December 24, 2021
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