Consumer Demand for Credit Back on Track While Early Indications of Portfolio Quality Show No Sign of Deterioration

TransUnion CIBIL analysed the impact of demonetization

Mumbai, March. 20, 2017 Consumer loan demand, which had seen a significant drop compared to prior months shortly after Nov. 8, 2016 demonetization announcement, has largely recovered and is back on track according to new TransUnion CIBIL research. At the same time, initial indications of credit quality across portfolios show no immediate signs of deterioration. TransUnion CIBIL’s research looked at the impact of demonetization on credit demand for the period of November 2016 - February 2017, and on loan originations and portfolio quality through January 2017.

Following unprecedented consumer credit growth over the past four years, including loans for vehicles and homes, credit cards and other credit products, the announcement on demonetization created short-term disruption in the demand for consumer credit. However, new data for the months following the November announcement indicate a strong rebound in demand for retail loans.


Growth in Credit Demand

[Increase in inquiries over the same month the prior year]









“The steady growth in credit demand in the months following the demonetization announcement indicates material growth opportunities in the retail credit sector in India. This is a promising indicator for the stability and growth prospects of our country’s credit industry and the economy overall,” said Ms. Amrita Mitra, Vice President of Financial Services Research and Consulting at TransUnion CIBIL. “Even more significant is the fact that loan performance has remained stable post-demonetization, demonstrating the resilience of the Indian consumer”.

While consumer demand for credit has largely rebounded, loan originations have been impacted by the event, with aggregate credit granted dropping 12% in November 2016 compared to November 2015. This trend continued in December 2016, with loan originations down by 13% compared to the same month the prior year. Public sector banks have shown the largest decrease in loan originations among major lender types, down by over 50% in December 2016 compared to December 2015.


Credit Granted YoY Growth – All Consumer Account Types









A notable exception to the origination drop has been in credit cards, which experienced a 12% increase in originations in November 2016 over the prior year, and a further 10% year-over-year increase. In this respect, the “go cashless” objective of the demonetization policy has shown initial positive results.

“We are clearly seeing a divergence between consumers, who have shown increased demand for credit, and lenders, who have scaled back their originations since the demonetization announcement”, continued Ms. Mitra. “The drop in originations is not a consumer demand issue—it is a lender supply issue. In light of generally stable consumer credit performance post-demonetization, this lender retrenchment may be unwarranted.”

Analysis of the delinquency trends (90 days or more past due) in December 2016 compared to December 2015 shows relatively stable performance overall, with improvements in auto loan and credit card delinquency rates offsetting some deterioration in two wheeler and housing loans.

% balance outstanding 90+ days past due

Dec 2015

Dec 2016

Change in basis points

Auto Loan




Credit Card




Two Wheeler Loan




Housing Loan




“While we will continue to monitor portfolio performance over the coming months, we are very encouraged by these early signs of relatively stable delinquencies,” Ms. Mitra said. “Lenders may have curtailed origination activity in anticipation of a significant increase in delinquency, but to date we have not experienced that deterioration. TransUnion CIBIL analysis reveals continued growth opportunities in the retail credit sector in India. The key challenge for lenders is how to prudently capitalize on this opportunity to meet higher consumer credit demand. TransUnion CIBIL will continue to analyse credit application, origination and performance data to identify any early signs of nascent stress or risk, as well as pockets of opportunity for lender growth.”

About TransUnion CIBIL

TransUnion CIBIL is India’s leading credit information company and maintains one of the largest repositories of credit information globally. We have over 2600 members–including all leading banks, financial institutions, non-banking financial companies and housing finance companies–and maintain more than 600 million credit records of individuals and businesses.

Our mission is to create information solutions that enable businesses to grow and give consumers faster, cheaper access to credit and other services. We create value for our members by helping them manage risk and devise appropriate lending strategies to reduce costs and increase portfolio profitability. With comprehensive, reliable information on consumer and commercial borrowers, they are able to make sound credit decisions about individuals and businesses. Through the power of information, TransUnion CIBIL is working to support our members drive credit penetration and financial inclusion for building a stronger economy

We call this Information for Good.