TransUnion CIBIL CMI Indicates Stability in the Retail Credit Market

• Credit demand continued to grow after the festive season, up 33% YoY in January 2022
• Balance-level delinquencies—defined as 90+ days past due—remained stable in November 2021 across most major retail lending categories
• Private Banks and NBFCs scaled growth significantly through the second half of CY 2021
• Most states with larger total credit balances recorded an improvement in credit health

Mumbai, March 2, 2022 – TransUnion CIBIL today released findings for the second edition of its Credit Market Indicator (CMI). Designed to provide India’s credit industry with a reliable and contemporary benchmark of retail lending health, it continued to map the market’s recovery in a post-pandemic world.

The latest * of 91 in November 2021 is up four points from when it was last published in August 2021, and up considerably from its low of 79 in February 2021. The results mirror the wider improvement in economic activity and reflect the positive lift in consumer sentiment**. The CMI is a comprehensive measure of data elements that are summarized on a monthly basis to analyze changes in credit health and are categorized under four pillars: demand, supply, consumer behavior and performance. These factors are combined into a single, comprehensive indicator measure and pillars can also be viewed in more detail individually.

Demand grew significantly, credit performance stood stable

The latest TransUnion CIBIL CMI showed credit demand continued to grow. When looking at inquiry volume—a measure of consumers applying for new credit—by product type for the three months ending November 2021, year-on-year (YoY) demand increased significantly for consumption products*** – with consumer durable loans up 97%, and personal loans up 80%. Early data suggest the increase in demand has continued past the festive period and into the New Year. Inquiry volumes increased YoY by 33% in January 2022 compared to a YoY decline of 10% in January 2021.

Rajesh Kumar, Managing Director and CEO, TransUnion CIBIL, observed: “Despite the third wave of the pandemic, India’s retail credit market continued to exhibit an accelerated growth trajectory, with consumer demand outlasting the festive season. This growth coupled with the fact that credit performance remained stable bodes well for the resurgence in India’s credit market. The latest CMI reflects this accelerated growth, evident through the increase in inquiries and outstanding credit balances as well as portfolio stability as reflected in delinquency data.”

Chart 1: Monthly CMI for Last Two Years (November 2019-November 2021)ⁱ

Source: TransUnion CIBIL consumer credit database.

(i)    When selecting certain variables, year-on-year (YoY) movements are analyzed to remove the effects of seasonality. The increase in April 2021 CMI was temporary and driven primarily by an exponential increase in inquiries and originations in April 2021 compared to a lower base of April 2020. Inquiry and origination volumes increased YoY by 8.5 times and 5.2 times respectively in April 2021.

(ii)   The November 2021 CMI value is provisional and subject to revision as additional data are reported to the TransUnion CIBIL credit bureau.

Assessment of the CMI on credit performance shows stability in overall performance through 2021. Balance-level delinquencies—defined as 90+ days past due—saw little change YoY in November 2021 across most major retail lending categories. Credit cards recorded a 77 basis points (bps) improvement and consumer durable loans (up just one bp) and personal loans (up just five bps) were relatively unchanged.

Table 1: Balance-level 90+ days-past-due (DPD) by Product (Nov-2021)

Source: TransUnion CIBIL consumer credit database

Private Banks and NBFCs saw a significant increase in demand and supply

While Public Sector Banks led the resurgence in credit growth, Private and NBFCs have scaled significantly through the second half of CY 2021. The CMI by lender category reflects this rapid scaling of growth in demand as well as supply by Private Banks and NBFCs, leading to a convergence across lender categories.

Chart 2: CMI by Lender Category for Last Two Years (November 2019-November 2021)ⁱ

Kumar continued: “Although the impact of COVID-19 is far from over, India has proven its ability to adapt and operate in what is now the new normal. As economic activity increases, lenders need to continue to adapt to the evolving needs of consumers in order to best serve India as the credit market works together for the benefit of the nation.”

Most states with larger total credit balances recorded an improvement in credit health

Importantly, the CMI recovery was widespread and was recorded across most of India’s major states based on total retail credit balances outstanding. Tamil Nadu recorded the largest change YoY in November 2021, up eight points to a CMI of 93. Delhi (up seven points to 95) and Gujarat (up six points to 93), also recorded significant growth in credit market health.

Table 2: November 2021 CMI and YoY Change for Top 12 States by Portfolio Size

Source: TransUnion CIBIL consumer credit database.

Improved credit penetration catalyzed financial inclusion

Credit penetration—the percentage of the adult population that is credit active—increased from just over 17% in November 2019, to just under 21% in November 2021. This points to increased financial inclusion and reflects the ongoing evolution of the Indian credit market. Growth in the number of credit-active consumers was 19% YoY in November 2020, but has been more moderate (around 10%) throughout 2021 as the market returned to a steadier cadence post the initial impact of the pandemic.

Kumar concluded: “It is encouraging to see continued growth in credit-active consumers. Greater financial inclusion means Indians are increasingly gaining access to retail credit products, which can act as a catalyst for economic growth as well as providing access to a higher quality of life.”

* The TransUnion CIBIL Credit Market Indicator (CMI) is an evolving model which is regularly reviewed to ensure the most relevant variables and their relative weighting are selected to best chart the credit health of India’s lending market. When selecting certain variables year-on-year movements are analyzed to remove the effects of seasonality.

** Based on the latest CMIE (Centre for Monitoring Indian Economy) which shows GST Collections at INR 1,298 Billion in December 2021, up from INR 323 Billion in April 2020, and consumer confidence at 57.6 compared to 41.7 in May 2020.

*** Consumption loans include personal loans, credit cards and consumer durable loans.