Indian Consumer Credit Market Slowdown Continues; Reliance on Unsecured Credit Raises Concerns

Latest TransUnion CIBIL Industry Insights Report shows risks rising in some consumer credit products

Mumbai, October 30, 2019 – Growth in India’s consumer credit market continued to decelerate in the second quarter, driven primarily by secured lending products. As well, non-banking financial companies (NBFCs) remained under stress, with a recent portfolio shift to higher-risk unsecured credit, according to the newly-released TransUnion CIBIL CY Q2 2019 Industry Insights Report (IIR).

NBFCs, which have played a key role in consumer credit growth in recent years, saw slower growth in the second quarter compared to banks. NBFCs continued to face difficult funding challenges and consequently have been shifting their originations strategy away from larger-value loans to smaller-ticket personal loans.

Consumer credit balances across all major credit products grew 17.1% year-on-year (YoY) in Q2 2019, compared to 23.5% YoY in Q2 2018. Growth in credit cards and personal loans significantly outpaced increases in auto loans, home loans and loans against property (LAP). The total number of consumers with access to credit increased by 21.7% YoY in Q2 2019, which, although still quite high in comparison to most major economies worldwide, was down materially from the 26.3% jump YoY in Q2 2018.

Portfolio delinquency rates for most consumer credit products declined on a YoY basis in Q2 2019, the exception being for LAP. However, it can happen that high origination growth can mask portfolio-level delinquencies. To address this concern, TransUnion studied the delinquency dynamics of several fixed cohorts of accounts. This static pool analysis—also known as vintage analysis—confirmed the general improvement in delinquency rates YoY, but did reveal performance deterioration for smaller value personal loans and auto loans issued by NBFCs.

“The NBFC liquidity crisis is becoming a serious concern, as it could have negative ramifications on wider economic activity,” said Abhay Kelkar, vice president of research and consulting for TransUnion CIBIL. “Even though overall consumer credit delinquencies have remained largely stable through this slowdown, our data indicates that there are some stress build ups in NBFCs. While strong lender risk management policies are always important for the health of the lending market, we find ourselves increasingly in an environment where vigilant monitoring and thoughtful strategies are essential to minimize the impact of weakening portfolio performance.”

Credit Product

Origination balances

(INR billions)

Origination balances YoY % Change

Total Balances (INR billions)

Total Balances YoY% Change

Serious Delinquency Rates2 (Balance-Level)

Serious Delinquency Rates YoY Basis Point Change

Vintage Delinquency3 YoY Basis Point Change

Credit Card1








Personal Loan








Auto Loan








Home Loan








Loans Against Property








  1. Credit card originations are by account volumes in millions
  2. Serious delinquency rates are measured as the percentage of balances 90 or more days past due
  3. Vintage delinquency looks at all accounts originated in Q2 2017 and Q2 2018 and compared  90+ delinquency rates of those new accounts after 12 months of activity

Credit cards and personal loans largely driving credit market growth

Robust balance and originations growth in the unsecured lending categories of credit cards and personal loans continued in Q2 2019.

A healthy 30.2% YoY increase in credit card originations volumes in Q2 2019 led to strong 29.5% YoY growth in the total number of credit card accounts in Q2 2019. Over the same period, total credit card balances increased by 34.3%.

During Q2 2019, there was a shift in credit card originations to higher-risk tiers. In Q2 2019, 32.1% of card originations were to consumers in below-prime risk tiers (subprime and near prime), compared to 26.4% in Q2 2018.

Below-prime consumers, which are higher-risk borrowers, have a TransUnion CIBIL V2 credit score of 700 or lower. Full bandings are defined as: subprime = 300-650, near prime = 651-700, prime = 701-750, prime plus = 751-800, and super prime = 801-900. Higher scores are indicative of lower risk.

Despite the shift in originations to higher-risk borrowers over the past year, credit card delinquencies improved by 27 bps YoY to 1.62% in Q2 2019. Balance-level delinquencies have ranged between 1.85-1.90% in the last five quarters. Vintage analysis confirms this improvement in delinquency across all risk tiers and delinquency at the portfolio level was not masking any hidden performance deterioration across individual origination cohorts.

Personal loan balances grew 35.0% YoY in Q2 2019, with origination volumes accelerating sharply – up 139.4% YoY in Q2 2019. NBFCs continued to be the primary driver of growth in this category. NBFC personal loan balances increased 51.4% YoY in Q2 2019, and the percentage of total origination volumes by NBFCs increased to 72.1% in the period from 48.4% in Q2 2018. The average ticket size (ATS) of NBFC personal loans dropped YoY to INR 41 thousand in Q2 2019 from INR 1.1 lakh in Q2 2018, causing a sharp dip in overall ATS. Almost 50% of NBFC originations in Q2 2019 were to borrowers in below-prime segments, which represented an increase of 8.5% over Q2 2018.

Improvements in public sector (PSU) and private sector (PVT) bank personal loan delinquencies more than offset a YoY increase of 6 bps in NBFC delinquencies during the second quarter, resulting in an overall lower delinquency rate YoY. Vintage analysis also showed improvements in PSU (-12 bps) and PVT (-22 bps) delinquencies and deterioration in NBFC cohort performance (+51 bps). Breaking down NBFC vintage delinquencies further by loan size, TransUnion CIBIL’s analysis found an increase in delinquency for NBFC loans smaller than INR 50 thousand (+191 bps), which constitute almost 80% of NBFC personal loan originations.

“Credit card and personal loan balances in below-prime and mid-risk tiers had higher growth rates than the market overall,” said Kelkar. “This indicates a greater willingness among lenders to relax their underwriting standards and extend more unsecured credit to higher-risk borrowers. This approach can certainly lead to growth, as we have seen, but it requires consistent and effective risk management strategies to be managed properly on an ongoing basis.”

Auto, Home Loans and LAP categories growing modestly

Sluggish passenger vehicle sales continued to affect auto loan growth and serve as a drag on India’s overall consumer credit market.

Auto loan balances grew 10.9% YoY in Q2 2019, down significantly from growth of 23.3% YoY in Q2 2018. Auto loans recorded the slowest rate of growth of all major lending categories in Q2 2019. Balance-level auto delinquencies of PSU and PVT lenders showed YoY improvement in Q2 2019, reflecting those lenders’ continued focus on lower-risk borrowers. Delinquencies of NBFCs increased by 7 bps YoY. Vintage analysis also showed an increase in delinquencies of NBFCs (+114 bps) across risk tiers. The increase in NBFC vintage delinquency is sharper for loans smaller than INR 2.5 lakhs (+164 bps), which forms almost 55% of NBFC auto loan acquisitions.

In the housing market, affordability constraints among younger generations was a factor limiting overall home purchases in Q2 2019, consequently limiting credit growth. Originations volumes and balances again declined YoY in Q2 2019, implying likely soft market conditions going forward. Home loan delinquencies saw a small YoY improvement.

In Q2 2019, total home loan balances grew 14.5% YoY, compared to a 20.6% YoY increase in Q2 2018, a deceleration driven by lower loan origination levels. Growth of NBFC home loan balances in the period slowed to 13.6% YoY, versus 24.1% YoY in Q2 2018. Origination volumes declined by 11.9% in Q2 2019. Origination balances also continued to decline (a drop of 6.3%), with balances originated by NBFC lenders decreasing 17.9% YoY in Q2 2019, in sharp contrast to 16.3% growth YoY in Q2 2018.

“Balance delinquencies improved marginally by 3 bps in Q2 2019 to 1.68%, compared to the same period last year,” said Kelkar. “Breaking that down, delinquency rates for PSU lenders improved YoY by 34; delinquency essentially remained flat for PVT lenders, with a small improvement of 3 bps; and NBFC portfolios saw a YoY delinquency increase of 27 bps YoY in the period.”

Credit growth in loans against property (LAP) has been negatively affected by poor sentiment in the property market. As a result, originations continued to decrease.

LAP balances grew 16.7% YoY in Q2 2019, versus 26.4% YoY in Q2 2018. This reflected a sharp slowdown of growth in LAP balances of PSU lenders, from 35.4% YoY in Q2 2018 to 14.9% YoY in Q2 2019. Origination balances decreased 20.9% YoY in Q2 2019.

“Market pressures have caused a shift in the composition of LAP originations. Balances originated by PSU and NBFC lenders declined 31% and 36% YoY, respectively, in Q2 2019, while at the same time balances originated by PVT lenders grew 12% YoY,” continued Kelkar. “This increased the PVT share of LAP originations to 37% in Q2 2019 from 26% in Q2 2018.”

LAP saw the most significant increase in delinquencies over the past year among major consumer credit products. Balance-level delinquency rates increased by 25 bps to 3.47% in Q2 2019, reflecting increases across PSU, PVT and NBFC lenders of 29, 27 and 49 bps, respectively. These delinquency increases primarily occurred in loans larger than INR 1 Crore.

“The Indian consumer credit market continues to expand at a rate higher than most other major economies, but there are growing pains associated with that expansion. Originations and balance growth continue to be robust for unsecured products, including credit cards and personal loans, but a higher share of this growth is to higher-risk borrowers. While overall delinquency rates have generally remained stable, there are indications of higher risks in the market that lenders must understand, and adjust their strategies to address effectively,” said Kelkar.

“In today’s challenging market, it is critical that lenders conduct increasingly sophisticated analyses, such as vintage analysis, to better understand the underlying health of their portfolios,” added Kelkar. “Such analysis will play an important role in helping ensure institutions acquire accounts with acceptable risk, closely manage loan loss reserves and adjust pricing appropriately.”


About the TransUnion CIBIL Industry Insights Report

TransUnion CIBIL’s Industry Insights Report is an in-depth, full-population solution that provides statistical information every quarter from TransUnion CIBIL’s consumer bureau database, aggregated across virtually every live credit file on record. Each file contains hundreds of credit variables that illustrate consumer credit usage and performance. By leveraging the Industry Insights Report, institutions across a variety of industries can analyze market dynamics over an entire business cycle, helping to understand consumer behavior over time and across different geographic locations throughout India. Businesses can access more details about and subscribe to the Industry Insights Report at https://www.transunioncibil.com/insights-events


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 3000 members–including all leading banks, financial institutions, non-banking financial companies and housing finance companies–and maintain more than 1000 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.